Are you familiar with these tax code sections?
Tax Tip of the Week
August 22, 2016
Are you familiar with these tax code sections?
While the tax code sometimes seems like a foreign language, understanding the lingo can help you make informed decisions. The good news: You probably know more tax code sections than you think. Here are three you may be able to benefit from as you review your 2016 tax planning.
- Section 179. Section 179 is shorthand for an Internal Revenue Code section titled "Election to expense certain depreciable business assets." Essentially a very accelerated form of depreciation, Section 179 lets you write off the cost of business equipment in the year you place it in service instead of having to depreciate the asset over a specified useful life. For 2016, you can elect to deduct up to $500,000 of the cost of assets purchased, as long as the total cost of the assets you purchase and place in service during the year is less than $2,010,000. Your deduction is also limited by your taxable income for the year. Bonus question. Do you know what year Section 179 was added to the Internal Revenue Code?
- Section 529. Section 529 plans provide a tax-advantaged way to save for higher education expenses, and take two forms: prepaid plans and savings plans. With a prepaid plan, you pay for tomorrow's tuition costs at today's rates. With a savings plan, you put money in an investment account and the account grows tax-free until you make withdrawals to pay for higher education. The withdrawals are also tax-free as long as the expenses you pay meet the tax code definition of "qualified higher education expenses," such as tuition, books, and certain computer expenses. Bonus question. Withdrawals from Section 529 savings plans must be used for tuition at U.S.-based schools only. True or false?
- Section 1031. You're probably familiar with Section 1031 in the form of the expression "like-kind exchange." An exchange of similar business or investment properties that meets the requirements of Section 1031 allows you to postpone the federal income tax on gain from the transaction. Keep in mind the tax is postponed, or deferred, not eliminated. You'll still need to track your basis in property you acquire in an exchange. Bonus question. Section 1031 rules apply only to corporations. True or false?
Got questions about tax rules or need help with tax planning? Contact us for answers. We'll be happy to tell you Section 179 was added to the Internal Revenue Code in 1958, Section 529 savings plan withdrawals can be used tax-free at certain foreign colleges, and Section 1031 rules apply to individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, and trusts.
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
© MC 2016
August 22, 2016
Are you familiar with these tax code sections?
While the tax code sometimes seems like a foreign language, understanding the lingo can help you make informed decisions. The good news: You probably know more tax code sections than you think. Here are three you may be able to benefit from as you review your 2016 tax planning.
- Section 179. Section 179 is shorthand for an Internal Revenue Code section titled "Election to expense certain depreciable business assets." Essentially a very accelerated form of depreciation, Section 179 lets you write off the cost of business equipment in the year you place it in service instead of having to depreciate the asset over a specified useful life. For 2016, you can elect to deduct up to $500,000 of the cost of assets purchased, as long as the total cost of the assets you purchase and place in service during the year is less than $2,010,000. Your deduction is also limited by your taxable income for the year. Bonus question. Do you know what year Section 179 was added to the Internal Revenue Code?
- Section 529. Section 529 plans provide a tax-advantaged way to save for higher education expenses, and take two forms: prepaid plans and savings plans. With a prepaid plan, you pay for tomorrow's tuition costs at today's rates. With a savings plan, you put money in an investment account and the account grows tax-free until you make withdrawals to pay for higher education. The withdrawals are also tax-free as long as the expenses you pay meet the tax code definition of "qualified higher education expenses," such as tuition, books, and certain computer expenses. Bonus question. Withdrawals from Section 529 savings plans must be used for tuition at U.S.-based schools only. True or false?
- Section 1031. You're probably familiar with Section 1031 in the form of the expression "like-kind exchange." An exchange of similar business or investment properties that meets the requirements of Section 1031 allows you to postpone the federal income tax on gain from the transaction. Keep in mind the tax is postponed, or deferred, not eliminated. You'll still need to track your basis in property you acquire in an exchange. Bonus question. Section 1031 rules apply only to corporations. True or false?
Got questions about tax rules or need help with tax planning? Contact us for answers. We'll be happy to tell you Section 179 was added to the Internal Revenue Code in 1958, Section 529 savings plan withdrawals can be used tax-free at certain foreign colleges, and Section 1031 rules apply to individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, and trusts.
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
