Seven Year-End Tax Tips for 2018

Here are 7 tax moves for you to consider before the end of the year.

1. Defer income to next year. Consider opportunities to defer income to 2019, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year- end bonus or delay the collection of business debts, rents, and payments for services. Doing so may enable you to postpone payment of tax on the income until next year.

2. Accelerate deductions and take capital losses. You might also look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, paying medical expenses, mortgage interest, and charitable deductions before the end of the year, instead of paying them in early 2019, could make a difference on your 2018 return.

3. Harvest Capital Gains and Losses. Any appreciated stocks that you have held for a year and a day you can lock in the lower capital gains rate by selling at year end. You should also consider selling any stocks that can generate capital losses which you can deduct up to $3,000 after netting all your capital losses against all your capital gains. Keep in mind after you sell a stock you can buy it back after 31 days to avoid the wash sale rules.

4. Maximize retirement contributions. Deductible contributions to a traditional IRA, SIMPLE IRA or SEP IRA or pre-tax contributions to an employer-sponsored retirement plan such as a 401(k), can reduce your 2018 taxable income. If you haven’t already contributed up to the maximum amount allowed, consider doing so by year-end.

5. Take any required minimum distributions. Once you reach age 70½, you generally must start taking required minimum distributions (RMDs) from traditional IRAs and employer- sponsored retirement plans. However an exception may apply if you’re still working for the employer sponsoring the plan). Take any distributions by the date required — the end of
the year for most individuals. The penalty for failing to do so is substantial: 50% of any amount that you failed to distribute as required.

6. Beware of the 3.8% net investment income tax. This additional tax may apply to some or all of your net investment income if your modified adjusted gross income (AGI) exceeds
$200,000 ($250,000 if married filing jointly, $125,000 if married filing separately, $200,000 if head of household).

7. Bump up withholding if you expect to owe tax. If it looks as though you’re going to owe federal income tax for the year, especially if you think you may be subject to an estimated tax penalty, consider asking your employer to increase your withholding for the remainder
of the year to cover the shortfall. The biggest advantage in doing so is that withholding is considered as having been paid evenly through the year instead of when the dollars are actually taken from your paycheck. This strategy can also be used to make up for low or missing quarterly estimated tax payments. With all the recent tax changes, it may be especially important to review your withholding for 2018.

If you have any questions or need any help preparing your taxes please call Gregory J. Spadea at 610-521-0604. The Law Offices of Spadea & Associates, LLC prepares tax returns and advises business and individual clients on estate and tax planning year round.

How Much Can I Deduct If I Buy a Car or Truck for Business in 2018

Typically during the last quarter of the year my clients will call me and ask me how much they can save if they buy a business car or truck by the end of the year.  In light of the Tax Cuts and Jobs Act (TCJA) that was enacted on December 22, 2017 I thought I would write a blog to address it.  There are three vehicle weight categories that affect how much you can expense under Internal Revenue Code (IRC) § 179.  The first is for vehicles that have a gross vehicle weight (GVW) less than 6,000 pounds, the second is for vehicles that have a GVW of between 6,000 and 14,000 pounds and the third is for vehicles that have a GVW of over 14,000 pounds.

I. Passenger Vehicles, Light Trucks and Vans under 6000 pounds

The good news is that the TCJA allows for much bigger depreciation deductions for vehicles used for business. The changes apply to passenger vehicles, light trucks and vans  having a GVW of less than 6,000 pounds.  For 2018, the amount of the depreciation (expensing deduction) for a passenger car or light duty truck or van are as follows:

  • $10,000 for the 1st year,
  • $16,000 for the 2nd year,
  • $9,600 for the 3rd year, and
  • $5,760 for the 4th year and each succeeding year in the recovery period.

The TCJA retained the $8,000 limit for additional first-year depreciation for passenger automobiles. So in 2018, the maximum amount you can deduct for a passenger automobile in the first year is $18,000 (10,000 of regular depreciation plus $8,000 of bonus depreciation.) These numbers assume 100% business use so if the vehicle was used for less than 100% the depreciation deduction would be reduced accordingly.  The deduction will be adjusted for inflation after 2018.

II.   Heavy SUV’s Trucks and Vans Between 6,000 and 14,000 pounds

Heavy SUV’s, trucks, and vans that have a GVW of over 6,000 pounds are not subject to the passenger automobile depreciation limits above but remain subject to the $25,000 IRC § 179 limit, but they are eligible for 100% bonus depreciation if they are above 6,000 lbs.  This is true for both new and used vehicles.  In addition, taxpayers may elect to apply a 50 percent allowance which was the maximum in 2017 instead of the 100 percent allowance now available.

III. Vehicles that weigh more than 14,000 pounds

There is no depreciation limit under IRC §179 for vehicles that have a GVW of more than 14,000 pounds so you can write off the entire vehicle cost.

Therefore, the bottom line is that if you buy a new or used vehicle, that is used 100% for business and has a GVW of over 6000 pounds you can elect to deduct the entire cost of the vehicle in 2018 thanks to 100% bonus depreciation.

For property placed in service starting on January 1, 2018, the maximum depreciation expense deduction for the year is $1 million.  This dollar limit begins to phase out dollar for dollar once total purchases for the year exceed $2.5 million.  Therefore no depreciation expensing can be used once total purchases reach $3.5 million.

If you have depreciation questions or need help with your taxes please call Gregory J. Spadea at 610-521-0604.  The Law Offices of Spadea & Associates, LLC is located in Ridley Park, Pennsylvania.

Understanding the Philadelphia Summary Diversion Program

When someone makes a mistake, gets into trouble with the law, and gets a criminal record, the consequences can be severe. Having a clean record is important in order to take advantage of opportunities like getting into a good college or landing a good job.

The First Judicial District of Pennsylvania, in conjunction with the Philadelphia District Attorney’s Office has created “diversion” programs to divert a criminal case from the path towards trial to a potential resolution that will be more favorable to the person charged. When criminal charges are diverted, it allows the Philadelphia District Attorney’s Office to utilize its limited resources in a more effective manner with the goal of prosecuting more serious crimes. One such program is the Philadelphia “Summary Diversion” Program.

The majority of defendants charged with a summary citation who have not previously participated in the Summary Diversion program are eligible, with the exception of the following charges due to the nature of the charge:

  • Cruelty to Animals;
  • Criminal Mischief;
  • Cutting Weapons;
  • Weapons in general including

In addition, any defendant issued citations by any of the following four agencies also are not permitted to enroll and are automatically scheduled for trial in Philadelphia Municipal Court:

  1. Pennsylvania SPCA (Society for the Prevention of the Cruelty to Animals)
  2. Pennsylvania Department of Agriculture
  3. Pennsylvania Vehicle Fraud Investigations
  4. Pennsylvania Department of Revenue (which handles financial benefits and welfare fraud).

There are exceptions to this general rule, and sometimes my law firm may be able to secure the agreement of the Philadelphia District Attorney’s Office in resolving a Criminal Mischief charge, for example, through the Summary Diversion Program (SDP).

If a defendant’s case is approved for the SDP, the defendant will not enter a plea. Upon successful completion of the program, the Philadelphia District Attorney’s Office will withdraw prosecution of the criminal charges against the defendant.

Defendants accepted into the Philadelphia SDP attend the program on a Saturday. The program takes place at the Philadelphia Criminal Justice Center located at 1301 Filbert Street, Philadelphia, PA 19107. The cost of the Summary Diversion Program is $200, and full payment must be made by money order and payable on the day the defendant attends the program.

For example if you are facing a first time Philadelphia underage drinking or a Philadelphia fake ID charge, the Philadelphia Municipal Court will amend the charge to disorderly conduct and the defendant will not lose their driver’s license as would be the case if a person, often a college student, is convicted or pleads guilty to underage drinking or possessing a false ID.  You can then qualify for the and complete the SDP and get the charge expunged

A defendant’s case will be automatically expunged after successful completion of the Summary Diversion Program (SDP), but it can take up to nine months.

The reason the SDP is better than other Philadelphia diversion programs such as the Accelerated Misdemeanor Program or Accelerated Rehabilitation Disposition is that a person in the SDP isn’t required to serve any type of probation, but only complete the one day class.

If you have any questions or are charged with a crime contact Gregory J. Spadea at 610-521- 0604.

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