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What Utah Businesses Should Know About Employee Retention Tax Credits


The past year has caused a significant strain on the local economy, especially impacting local businesses. As a result of the pandemic, businesses have been eligible for many tax breaks to help them stay afloat during these trying times.

If your Utah business was hit hard over the last year, you might want to consider taking advantage of the employee retention tax credit. Established in March 2020 in the CARES Act, the employee retention tax credit has been expanded upon since the December relief package, and the American Rescue Plan Act signed in March 2021.

Why should your business take advantage of the employee retention tax credit? AA Tax & Accounting Services, LLC is ready to walk you through how your Utah-based business can gain substantial benefits by claiming this tax credit.

How the Employee Retention Tax Credit Works

When the employee retention credit was initially created as part of the CARES Act, it provided eligible businesses with refundable credits of 50% of up to $10,000 in qualified wages paid per employee in 2020. In summary, eligible businesses would receive a tax credit of up to $5,000 per employee last year.

Since then, some changes have been made to the employee retention tax credits to expand them even further — providing Utah businesses with even more tax breaks. In March 2021, the American Rescue Plan Act was signed into law, increasing the eligibility of businesses and adjusting the date that the credit needed to be claimed. The biggest adjustment to the employee retention credits is that eligible businesses cannot deduct up to 70% of up to $10,000 in qualified wages paid per employee per quarter in 2021. This means that eligible businesses would receive a potential annual tax credit of $28,000 per employee this year.

For businesses struggling to make ends meet, the employee retention tax credits provide a significant bonus.

Is My Utah Business Eligible?

Not all businesses are eligible to receive the employee retention tax credit — its purpose is to focus on businesses that were hit hardest by the COVID-19 pandemic.

Eligibility for the 2020 employee retention credit is determined by if your business experiences a full or partial shutdown due to a government order limiting commerce, travel, or meetings, or if your business saw more than a 50% quarterly decline in gross receipts.

Because of the expanded parameters of the employee retention tax credit in 2021, business eligibility was also adjusted slightly. Eligibility was expanded to include businesses that underwent a full or partial shutdown or experienced more than a 20% quarterly decline in gross receipts.

Tax Consulting Services in Cedar City, Utah

Navigating business taxes is already an overwhelming process, and with the adjustments to the employee retention tax credits between 2020 and 2021, it’s even more confusing. Because of the complexity of the tax credits, we recommend consulting certified public accountants like AA Tax & Accounting Services for help making any decisions related to your business taxes.

From one-time tax consulting services to ongoing consulting services, our tax consultants work with many clients as their tax advisor and tax preparer — ensuring that your tax team understands your taxes backward and forwards. Our team has the experience to provide you with the most effective strategies for maximizing deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies and determine if your Utah business is eligible for the employee retention tax credits. Contact us to schedule an appointment.

Farm Owner? Here’s What You Should Know About Doing Taxes for Farmers


Not many people enjoy tax season, especially when you own and operate a farm. As a farmer, you deal with many different income sources, expenses, deductions, and credits, all of which can make filing your tax return even more complicated. If you’re a farm owner and are struggling to understand how taxes work for farmers, you’re not a lot. To help make filing your taxes a bit less daunting, the team at AA Tax & Accounting Services, LLC has put together a guide to filing taxes as a farmer.

Determine If You’re Considered a Farmer

To make the most of the credits and deductions associated with farming, you need to be classified as a farmer in the eyes of the Internal Revenue Service (IRS). Do you own property that produces fruits and vegetables that are purchased on-site by the local community? Do you grow produce in your backyard and sell it at a roadside stand?

According to the IRS, a farmer is someone who “cultivates, operates, or manages a farm for profit, either as an owner or a tenant.” This can range from operations on a ranch and range to orchards and groves, and it can involve raising livestock and poultry or growing produce.

In most cases, you will not qualify as a farmer if you are a low-end operation growing fruits and vegetables in your backyard to sell as a side hustle. This income would be considered hobby income because your primary occupation isn’t farming-related, which means you would not have access to the same tax breaks as a qualified farmer.

Report on Your Farming Income

Come tax season, you need to be able to report all streams of income for the past year. While your primary source of income may be from sales of crops, there are a variety of types of farming income that need to be reported. A few of these include:

  • Selling livestock
  • Selling produce, grain, and other products
  • Distributions from a cooperative
  • Prizes from livestock competitions
  • Agricultural program payments
  • Crop insurance proceeds
  • Federal crop disaster payments

There are quite a few types of farming income that need to be reported on come tax season. Because of this, you must keep a record of all income throughout the year so you can easily and effectively report income on your tax return.

Understand Which Expenses Can Be Deducted

As a farmer, there are quite a few deductions you can take advantage of. These include:

  • Seeds and plants
  • Chemicals
  • Feed
  • Fertilizers and lime
  • Insurance
  • Veterinary costs for livestock

While farmers can make a lot of deductions on their tax return, there are a few expenses that can not be deducted:

  • Living expenses not related to farm income
  • Value of deceased animals
  • Inventory losses
  • Personal losses
  • Expenses from raising livestock or growing produce for personal use

Take Advantage of Tax Breaks

While there are plenty of opportunities for you to receive tax breaks from expensing qualified deductions, there are additional tax breaks and credits that farmers can take advantage of.

  • Home Office – Is your personal residence also the home of your farm? If a portion of your home is used exclusively for your farming operation, you may be able to make the most of the home office deduction.
  • Net Operating Loss – Because farming income can be extremely unpredictable and is dependent on the success of a crop, you can deduct losses when they exceed your other income from the year. When applicable, this loss can be deducted from income in the previous two years, allowing you to receive a refund. You can also opt to carry this net operating loss forward for up to 20 years.
  • Fuel Credits – When operating your farm with gasoline or fuel, you may be eligible to claim a credit on the excise taxes you paid. Certain requirements and limitations include not receiving a credit or refund for taxes on dyed diesel fuel and dyed kerosene.

Call for Tax Consulting Services for Farm Owners

From one-time tax consulting services to ongoing consulting services, our tax consultants work with many clients, including farm owners, as their tax advisor and tax preparer. With our team, you can have peace of mind knowing that your tax team understands your farming taxes backward and forwards. We have first-hand experience working with farm owners to provide you with the most effective strategies for maximizing deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies for your farming operation. Contact us to schedule an appointment.

What Medical Expenses Can I Deduct From My Taxes?


Medical expenses add up quickly, especially if the costs aren’t covered and reimbursed through your health insurance. If you or your dependents have racked up medical expenses, you might have the opportunity to claim them as a deduction on your next tax return.

To ensure you’re making the most of the medical expense deduction, AA Tax & Accounting Services is here to breakdown how it works.

Are medical costs tax-deductible?

Suppose you or a dependent have a high volume of medical expenses. In that case, you’ll be pleased to know that the Internal Revenue Service allows you to deduct unreimbursed medical expenses from your tax return.

However, there are stipulations to the types of medical expenses that can be counted towards your tax deductions.

When filing your tax return, you can deduct qualified medical expenses if they equal more than 7.5% of the previous year’s adjusted gross income.

For instance, if your adjusted gross income is $75,000, any amount exceeding the first $5,625 of medical expenses can be deducted. This means that if your medical expenses totaled $15,000, you would be eligible to deduct $9,375.

Medical expenses eligible for tax deductions

To prepare you for the upcoming tax season, we’ve put together a list of qualified medical expenses that can be deducted from your tax return:

  • Acupuncture or other forms of alternative treatments
  • Addiction treatment, which includes food and lodging at a rehabilitation center
  • Adaptive equipment including wheelchairs, shower seats, and other disability accommodations
  • Birth control pills
  • Blood-testing kits and strips for diabetes
  • Breast pumps and pumping equipment
  • Chiropractic services for medical purposes
  • Diet food and supplements when prescribed by a doctor to alleviate a specific medical condition
  • Eye exams and, if applicable, contact lenses and prescription glasses
  • False teeth
  • Hearing aids or other hearing equipment
  • Home improvements to increase accessibility due to a medical disability
  • Household help for nursing care services
  • Lodging when traveling out-of-town for a medical treatment
  • Organ transplants
  • Prosthetic limbs
  • Psychiatric care
  • Reproduction costs covering abortions, vasectomies, and fertility treatments
  • Service animals meals, training, and veterinarian expenses
  • Sex-reassignment surgery and hormone therapy to treat gender identity disorder (GID)
  • Special education
  • Programs supporting physical or mental conditions such as dyslexia or ADHD
  • Public transportation costs to and from medical visits
  • Wigs for those with a medical condition such as cancer or alopecia

You must track all your medical costs throughout the year, so come tax season, you can easily determine if you need the requirements to deduct your medical expenses from your tax return. Hold onto all copies of receipts and make a note of which expenses haven’t been reimbursed so you can reduce your tax bill with little headaches.

Additional rules to be aware of

If you’re planning to deduct medical expenses from your tax bill, here are two additional rules to be aware of:

1. You are only allowed to include medical expenses that were paid during the tax year.

2. If you were reimbursed for any medical expense through your insurance, that bill cannot be included in your tax deduction.

How to claim the medical tax deduction

Now that you’re aware of what types of medical expenses can be deducted from your tax bill, you must set yourself up for success come tax season.

You will be required to itemize your deductions, which is why it’s helpful to hold onto and organize all receipts you receive throughout the year.

Tax consulting services in Cedar City, Utah

If you have a high amount of medical expenses, AA Tax & Accounting Services can help you better understand how to maximize your medical expense deduction to save you the most money on your upcoming tax bill.

No one should go into tax season with their questions unanswered. Our team of tax consultants has the experience navigating the most effective strategies for maximizing their deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money on your medical expenses. Contact us to schedule an appointment.

Tax Info For Living In Utah But Working In Another State


Tax season can be stressful — and if you find yourself living in Utah and working in another state, you might be unsure how to navigate filing your tax returns this year. Depending on your status as a Utah resident, you may be required to pay tax on any income earned elsewhere.

No matter where you earn an income, you will need to file a tax return. When earning income in one state while living in another, you might find yourself filing a state tax return in your state of employment. While certain states like Alaska, Texas, Wyoming, Florida, New Hampshire, Washington, South Dakota, Nevada, and Tennessee don’t charge income tax, the state of Utah does.

To help you navigate this scenario, AA Tax & Accounting Services has put together a quick guide explaining when you will be required to pay taxes on income earned in another state.

Are you a Utah resident on non-resident?

If you live in Utah and work in another state, your state income tax requirements will be dependent on your Utah state residency.

When your permanent residence is in Utah, and you travel outside of the state for work, how long are you in the other state?

Do you have another residence in the other state?

If you leave your Utah residence for less than half a year, your income in another state is taxable in Utah. However, if you are a non-resident of Utah, which is classified as someone who has property in Utah but lives elsewhere for more than half the year, you aren’t required to pay Utah state income tax on any earnings from the other state since you aren’t legally a Utah resident.

What a non-resident needs to know

If you have earned income in Utah but are considered a non-resident of the state, you must file a Utah state tax return. In most cases, this income is earned while conducting business in the state, and you will need to file a Utah tax form called Form TC 40B.

Am I required to file taxes in both states?

In most situations, you will be required to file state income tax. There are a few scenarios where you might not be required to file taxes in both states.

The first reason is if the state doesn’t charge state income tax, such as Alaska, Texas, Wyoming, Florida, and a few others.

Another situation in which you might not be required to file taxes in both states is when a state has an agreement with bordering states. This agreement, known as a reciprocal tax agreement, allows individuals to live in one state and work in the other without filing two state tax returns.

Because Utah does not have reciprocity, you will likely need to file two separate state tax returns: a permanent resident and another non-resident.

How to claim credits for out of state tax

When filing your tax return as a Utah resident and claiming income that you earned out-of-state, you have the option to claim a credit for any income taxes paid to another state. This rule prevents you from facing double taxation on income earned out-of-state.

Tax consulting services in Cedar City, Utah

If you’re dealing with a unique situation, such as living in Utah and working in another state, we recommend consulting certified public accountants like AA Tax & Accounting Services when filing your tax return.

From one-time tax consulting services to ongoing consulting services, our tax consultants work with many clients as their tax advisor and tax preparer — ensuring that your tax team understands your taxes backward and forwards. You can have peace of mind knowing that our team has the experience to provide you with the most effective strategies for maximizing deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help navigate tax season smoothly when living and working in separate states. Contact us to schedule an appointment.

Are Bonuses Taxable?


Receiving a bonus at work is always an exciting surprise. But before you spend it all to fund a vacation or pay off some bills, you might be wondering if your bonus is taxable.

The short answer: yes, your bonus is taxable.

Unlike the regular paycheck you receive from your employer, any bonus payments are considered supplemental wages, which means your bonus will be taxed — and they will be taxed more than the standard income rate. These same tax rules apply to more than bonuses, including moving costs, tips, overtime, and severance.

When you receive a bonus, your employer will also withhold a designated amount sent to the Internal Revenue Service. AA Tax & Accounting Services has put together a quick guide to help you calculate how much of your bonus will be taxed.

How to Calculate the Taxes on Your Bonus

How much of your bonus will you be able to put the deposit into the bank? To determine how much of your bonus will be taxed, consider the following factors:

  • Social security tax – As of 2020, you are required to pay socials security tax on any compensation received up to $137,000. Your employer will take out 6.20% from your bonus check for social security until you hit this benchmark.
  • Medicare tax – Any compensation you receive much have medicare tax factored in. This means your employer will deduct 1.45% of the total bonus for Medicare tax.
  • Federal income tax – The standard federal tax rate is 25% — however, under tax reform, this number has been adjusted to 22% for bonus withholdings. If your employer withholds more than 22% for federal income tax, you will receive that overpayment back in the form of a tax refund when you file your annual taxes.
  • State income tax – The majority of states require residents to pay state income tax, which applies to bonuses. Depending on the state you work in, your employer will withhold the designated amount required by state law.
  • 401k contributions – If you contribute to a 401k with your standard paycheck, you will likely have a portion withheld from your bonus as well. This percentage will vary depending on the number you have set with your employer
  • .

All of these must be considered when determining how much of your bonus check will be withheld. To help illustrate these withholdings, we’ve put together an example calculation to demonstrate how you could calculate these numbers based on a $15,000 bonus check:

  • $15,000 x 25% = $3,750 in Federal tax
  • $15,000 x 5.25% = $787.50 in State tax (if applicable)
  • $15,000 x 1.45% = $217.50 in Medicare tax
  • $15,000 x 6.2% = $930 in Social Security tax

Using this example, you would deduct a total of $5,685 from the $15,000 bonus — which is a tax rate of 37.9%!

Tax Consulting Services in Cedar City, Utah

Suppose you have received a bonus or will be receiving one and have questions regarding supplemental income tax withholding. In that case, we recommend consulting certified public accountants like AA Tax & Accounting Services. Our team can help you better understand how your bonuses will be taxed and prepare you for the upcoming tax season, where it might be possible to recoup some of it through a tax refund. We have the experience to guide business owners on the best strategies for maximizing their deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you navigate the tax process when receiving supplemental income from your employer. Contact us to schedule an appointment for tax consulting services.

Federal And Utah State Tax Changes For 2021


2021 is here, which means it’s time to be out with the old and in with the new. The same goes for your taxes! While you will still be paying taxes in 2021, there are some new tax laws in place that might change your tax return.

Tax changes don’t need to be stressful or confusing. AA Tax & Accounting Services, LLC is here to walk you through the tax changes that will be impacting Utah residents in 2021 so you can feel confident as we head into tax season.

2021 Tax Changes for Utah

Although there are a few changes for Utah residents, there aren’t as many tax law adjustments as there have been in previous years. This is because the legislative session was shorter than usual because of the COVID-19 pandemic. Since sessions were shorter, fewer tax changes were put in place on January 1, 2021. While there aren’t many tax changes to be aware of, it’s still important that you have a full understanding of the changes and what they mean for you.

To help you feel more confident in these adjustments, here are two tax changes that will impact Utah residents and how they will impact your tax return.

Utah Excise Tax Changes

An excise tax refers to the taxes placed on manufactured goods that businesses often pay and pass along to the consumer. The taxes are levied when the product is manufactured instead of at the sale of the good because the tax costs are passed along to the consumer, the products’ price increases or decreases according to the current tax rate.

As of January 1, 2021, the state of Utah imposes an excise tax rate of 1.2% on the sale of prepaid wireless telecommunications services.

Other Utah Tax Changes

The excise tax rate isn’t the only change that Utah residents need to be aware of. As of January 1, 2021, individuals can use the revenue from the state’s income and personal property taxes for more than just public or higher education (like they were able to in the past). The allowable use has been expanded to be used for services supporting children and individuals with disabilities.

Tax Consulting Services in Cedar City, Utah

While there were fewer tax changes than usual in 2021 due to the COVID-19 pandemic, the adjustments to tax rules can still be challenging to navigate — especially if you’re dealing with a unique situation. Suppose you’d like to feel confident in how these tax changes affect your taxes. In that case, we recommend consulting certified public accountants like AA Tax & Accounting Services when making any decisions or changes to your tax return.

From one-time tax consulting services to ongoing consulting services, our tax consultants work with many clients as their tax advisor and tax preparer — ensuring that your tax team understands your taxes backward and forwards. You can have peace of mind knowing that our team has the experience to provide you with the most effective strategies for maximizing deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money come tax season. Contact us to schedule an appointment.

Tax-Deductions For The Self-Employed


As a small business owner, you know how important it is to save money wherever possible. That’s why it’s important to take advantage of tax deductions available to you. If you are self-employed and work from your home, you might be eligible to subsidize some of the related costs you might otherwise classify as personal expenses — helping to lower your tax bill.

AA Tax & Accounting Services is here to guide self-employed individuals through the tax deductions process to save the most money possible. Here are a few tax deductions to watch out for when filing your taxes this year.

5 Tax Deductions for Self-Employed

1. Home Office

To claim a home office deduction, you need to have part of your home used exclusively to fulfill the role. If you can prove you have a home office within your home used consistently and solely for your job, you can have part of your utility bills and insurance costs deducted from your business income. In some instances, you are even able to write off a portion of your rent or mortgage.

While many self-employed individuals are eligible for a home office deduction, many taxpayers don’t take advantage of this deduction. This might be because they are afraid to claim it, or they might not have the required records organized and ready to go. If you have a designated space in your home to conduct your business, it’s worth looking into this deduction to see if you’re eligible.

3. Technology and Equipment

Whether you recently purchased a new laptop to be more efficient during the day or you need to stock up on tablets for a client project, you can write off any technology and equipment used for business purposes. This includes everything from large technology like laptops and camera equipment to small items like phone chargers and keyboards.

3. Bank Fees

If you have a bank account specific to your business that incurs any fees, as a self-employed individual, you are eligible to write those off. When reviewing your bank statement, keep an eye out for the following fees that can be claimed as a deduction:

  • Maintenance fees
  • Overdraft fees
  • Late fees
  • ATM fees
  • Credit card membership fees
  • Loan setup fees

4. Business Vehicle Use

Depending on the nature of your business, you might be able to receive a deduction for the use of your vehicle. While most people assume a business vehicle deduction is only applicable to services like Uber or Lyft, that’s most definitely not the case.

Suppose you’re self-employed and use your personal vehicle for transportation to and from client meetings, to make deliveries, to pick up supplies, or another work-related outing. In that case, you can successfully claim this tax deduction. To make this claim, you will need to keep accurate records of the dates and miles you drove specifically for a work-related reason.

5. Meals

Although you won’t be able to claim a full deduction for meals, business-related meals can be claimed as a 50% deduction. This means that for any meals you purchase through your business, whether it’s a client dinner or a meal for a vendor, you are only allowed to deduct 50% of the total cost of the meal.

Review your dining transactions for the year and write off the following types of meals:

  • Client meals when you pay for the entire meal
  • Meals while traveling for business
  • Office snacks for you and employees
  • Meals for meetings with colleagues

Tax Consulting Services in Cedar City, Utah

If you’re self-employed, we recommend consulting certified public accountants like AA Tax & Accounting Services to better understand all the tax deductions available to you. We have the experience to guide business owners on the best strategies for maximizing their deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right self-employment tax strategies to save you money. Contact us to schedule an appointment.

Accounting Advice When Going Through A Divorce


When you’re in the middle of a divorce, you don’t have time to focus your attention and energy on much else. But unfortunately, your taxes aren’t going to wait until you have less on your plate. Filing your taxes for the first time post-divorce can be complicated — and there are a lot of details you and your ex will need to sort out beforehand.

To help guide you through tax season, AA Tax & Accounting Services has put together a list of accounting advice for when going through a divorce.

5 Accounting Tips For When You’re Going Through a Divorce

1. Determine Your Filing Status

First things first, you need to understand your filing status. Your marital status will determine this at the end of the year.

Were you divorced by December 31st of the tax year?

If you were divorced by then, you and your ex would file your taxes separately. However, if you were in the process of splitting up but didn’t have all the details of your divorce finalized by the end of the tax year, you will still have the option to file a joint tax return should you choose to do so.

Until your divorce decree is finalized, you can file jointly — which is likely to save you money.

2. Navigate the Transfer of Assets

It’s important to note that when transferring property assets from one spouse to another during a divorce settlement, the person receiving the asset will not be required to pay taxes on it. However, if the recipient chooses to sell that property, later on, they will have to pay capital gains tax on all the appreciation before and after the transfer. When navigating the transfer of assets process, you need to consider the tax basis and not just the property’s value.

3. Understand Exemptions for Dependents

Once finalized, your divorce decree will state which partner can claim any children as dependents. If this was not specified in your divorce decree, the custodial parent obtains the ability to claim the child(ren) as dependents.

In scenarios where parents have joint custody, the parent which the child resides for most of the tax year gets to claim the child as a dependent.

Suppose, for some reason, you and your ex would prefer that the noncustodial parent claims the dependent. In that case, this is possible if the custodial parent signs a waiver indicating that they will not claim the child as a dependent on their taxes that year.

4. Consider the Implications of Child Support

Child support will not affect your taxes at all. The child support payments are not taxable income for the recipient. Similarly, the payments are not tax-deductible for the parent that is paying child support.

5. Factor in Alimony Payments

Unlike child support payments, alimony payments are taxable income for the person receiving them. Likewise, they are tax-deductible for the parent who is paying the alimony.

All the details surrounding the alimony payments must be laid out within your divorce agreement for alimony payments to be taxable. If the alimony isn’t listed in the decree, the Internal Revenue Service won’t consider the payments to be true alimony.

Tax Preparation Services in Cedar City, Utah

Divorce can be stressful, but navigating the tax process post-divorce doesn’t have to be. AA Tax & Accounting Services is a full-service accounting firm that can help you navigate the process seamlessly. Our team has spent years serving Cedar City, Utah, and surrounding Southern Utah towns.

Contact us today to schedule an appointment for individual tax preparation.

Business Tax Strategies

Business Tax Strategies

Business Tax Strategies

When the financial year comes to a close, it’s important to take into account all the deductions and credits that can help you save money on your taxes. But navigating all of these cost-saving tax strategies can be a stressful process if you don’t know where to begin.

The team at AA Tax & Accounting Services has put together a list of strategies that can help you maximize your credits and deductions.

Take Advantage of the Health Care Tax Credit

If you pay for at least half of your employees’ health insurance premiums, have fewer than 25 full-time employees, and your employees earn an average annual salary of $50,000, then you might be eligible for the health care tax credit. This can save you money on your taxes but is helpful to navigate with the help of a certified public accountant.
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Consider Charitable Contribution Deductions

If your business has made any charitable contributions, you will want to deduct these when filing your taxes. A charitable contribution can be anything from donating money, goods, or services to an organization. When these offerings are donated, you can deduct the market value of the contribution when filing your tax return.

Account for Property Deductions

If your business has recently changed locations or acquired a new property, you can take advantage of property deductions. When this happens, you can deduct up to $500,000 of eligible business property. But keep in mind, that you can only use this deduction in the year that you first obtain the property.

Utilize the Work Opportunity Credit

When your business hires employees that are veterans, disabled, or part of another disenfranchised group, you are eligible for the work opportunity tax credit. This can be very beneficial when it comes to filing your tax report because you can receive up to 40% of the first $6,000 paid to a new employee from a disenfranchised group. However, it’s important to note that the size of this credit can vary in different situations.

Offer Child Care Expenses

Do you provide child care expenses for your employees? If so, you are eligible to receive a tax credit! If you pay for child care expenses, the credit will cover 25% of your paid expenses up to $150,000 annually.

Fund an Employee Retirement Plan

If you don’t have a retirement plan set up for your employees, it can be a great opportunity for you to save money on taxes. Set up and fund a qualified plan that is recognized by the Internal Revenue Service and you’ll be able to start taking advantage of the tax savings. There isn’t a one size fits all retirement plan for every company. Our team of professionals can help walk you through the different contribution plans and determine which is best for your business and your goals.

Account for the Cost of Gifts

If you’ve purchased any gifts for customers or vendors over the past year, you have the opportunity to deduct up to $25 per person off the cost of gifts. However, you aren’t able to claim this deduction if the gifts were provided to anyone bearing the same name as your business.

Tax Consulting Services in Cedar City, Utah

We recommend consulting certified public accountants like AA Tax & Accounting Services when making any decisions or changes to your business tax return. We have the experience to guide businesses on the best strategies for maximizing their deductions and tax credits with our accountant services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money come tax season. Contact us to schedule an appointment.

Important Tax Info For Multi-Family Properties

Important Tax Info For Multi Family Properties

As a residential property investor, it’s important to take advantage of tax benefits when possible to ensure you’re boosting your bottom line. Paying taxes is a must and can be quite costly, which is why there are many tricks to minimize the obligations surrounding multi-family home taxes.

Let’s explore the different ways that real estate investors can make reductions to the amount of property taxes owed on their multi-family homes.

Real Estate Depreciation Tax

Real estate depreciation is based on the principle that a rental property’s value declines over time due to wear and tear on the home. Think about it like a car’s value. As soon as the car comes off the lot, the quality and value begin to diminish. However, the home’s value is not usually decreasing because of factors like maintenance, renovations, neighborhood popularity, and market demand — which is why real estate depreciation is often referred to as a “phantom” expense for investors.

Because of real estate depreciation, the IRS allows investors to take a tax deduction based on the estimated decrease in the value of the multi-family property. This means that the investors can actually have a positive cash flow from the multi-family property, but shows a tax loss on paper — offering investors a major tax break.

How to Calculate Real Estate Depreciation

The IRS believes that a residential property is only useful for 27.5 years. This means that investors are able to deduct a depreciation expense from their taxes. Calculating your multi-family property’s depreciation amount is relatively simple and requires you to divide the property’s value by 27.5.

As an example, let’s look at a multi-family property worth $750,000. When dividing it’s value by 27.5, you will calculate a depreciation expense of $27,272.

Factoring that depreciation expense into your taxable income illustrates just how much an investor will save. Consider that your multi-family property generates $100,000 per year. This means you would have the following tax obligations:

Taxes owed without depreciation = $100,000 x 25% (federal income tax) = $25,000
Taxes owed with depreciation = ($100,000 – $27,272) x 25% = $18,182

With no other deductions other than a real estate depreciation tax, investors in this scenario would save $6,818 annually — which is massive tax savings of property taxes for multi-family homes!

Cost-Segregation

Similar to real estate depreciation, there is another tax benefit known as cost-segregation which also factors in the depreciation of elements within the multi-family property. This includes elements such as appliances, fixtures, and cabinets.

Unlike the home itself, these items within the home have a much shorter lifespan which can be written off taxes for no more than seven years.

One important thing to note when considering cost-segregation is that the more you use this on your annual taxes, the higher your tax bill will be upon selling the property. If you plan to sell the property and want to reduce taxes during the sale, be mindful of this tax benefit for multi-family homes in Utah.

Tax Deductions

As a residential real estate investor, you must take advantage of various tax deductions. In layman’s terms, a tax deduction is any type of expense that can be written off of your taxable income. With your multi-family home taxes, you have the ability to deduct any expenses incurred while managing, maintaining, or repairing your property from the total taxable rental income.

Consider writing off the following expenses you might incur with your multi-family property:

  • Property management costs
  • Maintenance or repair fees
  • Monthly utilities (water, gas, electric, etc.)
  • Property marketing costs
  • Mortgage interest
  • And more!

Investors of multi-family properties can really benefit from tax deductions (as well as depreciation and cost-segregation) in comparison to single-family investments. When filing property taxes for multi-family homes, you can pay a single tax bill that covers all the units within the property — making it more efficient to file and likely offers a higher rate than that of a single-family home.

The AA Tax & Accounting Services team is committed to maximizing our clients’ tax savings. Our full-service accounting firm has spent years serving Cedar City, Utah, and surrounding Southern Utah towns providing effective tax strategies for multi-family investors. Contact us to schedule an appointment.

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