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The Tax Cuts and Jobs Act passed in December of 2017 included a covert tax benefit, namely, the Qualified Opportunity Zone (“QOZ”). The QOZ was enacted to incentivize new investment into low income communities. The QOZ was not highly publicized because at the time it was enacted there were no geographical areas designated for the special tax treatment. The zones were to be established by each state no later than April 20, 2018. As recent as July 9, 2018, the IRS has published and approved zones that were nominated by each state. They also have published an interactive map showing specific zone borders corresponding to Opportunity Zone census tracts. In California, there are 879 zones representing 25% of the total possible tracts that meet the low-income threshold requirements. A census tract must have a poverty rate of at least 20% of the area median family income and no more than 80% of the statewide or metropolitan area median income. Census tracts are designed to capture geographic areas of no less than 4,000 people. California’s submission was sensitive to geographic diversity and areas with at least 30 existing business to avoid strictly residential areas.  In Southern California, there are numerous designated areas throughout Los Angeles, Long Beach, Santa Ana, Costa Mesa, Huntington Beach, San Clemente, etc. 


A hot topic from the Tax Cuts and Jobs Act (TCJA) tax reform for California and other high-income tax states was the limit to the State and Local Tax Deduction for individuals.  Before the TCJA an individual was allowed to claim the following types of taxes as itemized deductions, even if they were not business related: (1) state, local and foreign real property taxes (2) state and local personal property taxes (3) state, local and foreign income taxes.  This has been a huge benefit to reduce federal income taxes for high tax states with high property values resulting in large real estate taxes paid on personal residences.  The average state and local deduction taken by the 6.1 million California residents who filed for it in 2015 was $18,438.  The TCJA, that is effective from 2018-2025 now limits the itemized deduction for taxes paid by individual taxpayers to $10,000.  Immediately following the news that this major tax reform was approved by Congress on December 22, 2017, states such as California and New York have been strategizing on how to get around this new $10,000 limit on the State and Local Tax Deduction for individuals.


The tax bill has come to a rest for signature of the President with most changes becoming effective in 2018. For budgetary purposes, the period of which the law is changed ends in 2026. I believe this is the ten year window for deficit control over major revenue changes. 

The outline below highlights some of what we consider to be the more significant tax changes.

I.   Tax Rate Changes.  There are rate reductions in all brackets. There will be total tax saving of $32,000 on the first $1m of taxable income for married filers. Top marginal tax rate is lowered from 39.6% to 37%. Top corporate tax rate is reduced from 35% to 21%. 

II.   Capital Expenditure Write Off. Bonus depreciation has been supercharged:

1.   Bonus depreciation now allows for immediate expensing of qualified property through 2022 with the percentage phasing down thereafter. In a major shift in policy, used property is now eligible for this immediate write-off. Previous law allowed 50% bonus depreciation and only on new property. This will be a major benefit to parties that actively acquire qualified property. Cost segregation analysis will yield an immediate write off for cost basis allocated to onsite land improvements and personal property. Refurbishment costs performed post-closing to the interior of a building will also be qualified property for this write off. This applies to assets acquired after September 27, 2017.

2.   Enhanced automobile depreciation. 


"A thumb goes up, a car goes by…" Tax extenders remain a top contender for "hitching a ride" on November’s must-pass government funding bill.


The IRS has issued a revenue procedure with a safe harbor that allows certain interests in rental real estate to be treated as a trade or business for purposes of the Code Sec. 199A qualified business income (QBI) deduction. The safe harbor is intended to lessen taxpayer uncertainty on whether a rental real estate interest qualifies as a trade or business for the QBI deduction, including the application of the aggregation rules in Reg. §1.199A-4.


The IRS has released cryptocurrency guidance and frequently asked questions (FAQs) on virtual currency.


A district court has dismissed a lawsuit filed by four states’ against the federal government, ruling that the $10,000 state and local taxes (SALT) federal deduction cap is not unconstitutionally coercive.


New final regulations that address the allocation of partnership liabilities for disguised sale purposes revert back to prior regulations. Under the final regulations:


The IRS has released final regulation on the election to take a loss resulting from a federally declared disaster in the year preceding the disaster. The final regulations adopt proposed regulations substantially without change.


Proposed regulations provide guidance on the potential tax consequences of replacing the London interbank offered rates (LIBORs) with a new reference rate in contracts and agreements.


If you file a joint return and your taxable income is less than that of your spouse, the "spousal" IRA rules may allow you to contribute up to $5,000 in 2009 (or $6,000 if you are 50 or older) to an individual retirement account (IRA) this year. A "spousal IRA" is a term more commonly used to describe an IRA set up for a nonworking, stay-at-home spouse.


In many parts of the country, residential property has seen steady and strong appreciation for some time now. In an estate planning context, however, increasing property values could mean a potential increase in federal estate tax liability for the property owner's estate. Many homeowners, who desire to pass their appreciating residential property on to their children and save federal estate and gift taxes at the same time, have utilized qualified personal residence trusts.


In 2009, individuals saving for retirement can take advantage of increased contribution limits for various retirement plans. More money can be socked away with tax advantages like tax-deferred growth and possible tax-deductibility.


Have you ever thought about distributions of property dividends (rather than cash dividends) from your corporation?  In some situations, it makes sense to distribute property in lieu of cash for a variety of reasons. However, before you make the decision as to the form of any distributions from your company, you should consider the various tax consequences of such distributions.


Throughout all of our lives, we have been told that if we don't want to work all of our life, we must plan ahead and save for retirement. We have also been urged to seek professional guidance to help plan our estates so that we can ensure that our loved ones will get the most out of the assets we have accumulated during our lifetime, with the least amount possible going to pay estate taxes.  What many of us likely have not thought about is how these two financial goals -- retirement and estate planning -- work together. 


During uncertain economic times, it's easy to feel pessimism and react hastily amid media reports about growing unemployment rates and stock market downturns. However, such actions can wreak havoc on your long-term personal and financial goals. Taking some time out now to put the uncertain future into perspective can help minimize the impact that many external forces can have on your personal and financial life.


Q:  One of my children received a full scholarship for all expenses to attend college this year.  I had heard that this amount may not be required to be reported on his tax return if certain conditions were met and the funds were used specifically for certain types of her expenses.  Is this true and what amounts spent on my child's education will be treated as qualified expenses?


How much am I really worth? This is a question that has run through most of our minds at one time or another. However, if you aren't an accountant or mathematician, it may seem like an impossible number to figure out. The good news is that, using a simple step format, you can compute your net worth in no time at all.


Employers are required by the Internal Revenue Code to calculate, withhold, and deposit with the IRS all federal employment taxes related to wages paid to employees. Failure to comply with these requirements can find certain "responsible persons" held personally liable. Who is a responsible person for purposes of employment tax obligations? The broad interpretation defined by the courts and the IRS may surprise you.


How quickly could you convert your assets to cash if necessary? Do you have a quantitative way to evaluate management's effectiveness? Knowing your business' key financial ratios can provide valuable insight into the effectiveness of your operations and your ability to meet your financial obligations as well as help you chart your company's future.


Raising a family in today's economy can be difficult and many people will agree that breaks are few -- more people mean more expenditures. However, in recent years, the IRS has passed legislation that borders on "family-friendly", with tax credits and other breaks benefiting families with children. Recent legislation also addresses the growing trend towards giving families a break.


Imagine you had a camera that could take a snapshot of your financial transactions over the course of a year. This snapshot would give you a chance to see the results of financial decisions you made during the course of the year -- good and bad. By using your recently filed Form 1040 as a "snapshot" of your past spending and investment habits, you can use this information to make better financial decisions in the current year.


Q. Each year when it comes time to prepare my return, I realize how little I think about my tax situation during the rest of the year. I seem to lack any sort of common sense when it comes to dealing with my taxes. Do you have any general advice for people like me trying to "do the right thing" in any tax situation that may arise during the year?


Stock options have become a common part of many compensation and benefits packages. Even small businesses have jumped on the bandwagon and now provide a perk previously confined to the executive suites of large publicly held companies. If you are an employee who has received stock options, you need to be aware of the complicated tax rules that govern certain stock options -- several potential "gotchas" exist and failing to spot them can cause major tax headaches.


Telecommuting not only offers employees flexibility, but accommodates lives that can often be hectic. While employees love the lifestyle and family/home advantages of telecommuting, the potential improvement to the bottom line is what appeals to employers.


A number of charities use the Internet to solicit funds, allowing potential donors to make contributions online. You can even create an account in a special type of planned giving instrument: a donor-advised fund. What are these funds, and are they right for you?


Q. I am reviewing my portfolio and considering selling some of my stock. How do I determine what tax basis I have in the publicly-traded shares that I own for purposes of determining my gain or loss if I buy and sell multiple shares at different times? Does keeping track of basis really matter?