Taxpayers that itemize their deductions can deduct certain state and local taxes (SALT). These SALT deductions can include property, income, and sales tax. Although all three are eligible, taxpayers must choose between deducting income tax or sales tax, while property taxes are always eligible. In 2017, when the Tax Cuts and Jobs Act was signed, the previously unlimited SALT deductions became limited to $10,000. Many pass-through entity (PTE) owners located in states with high income taxes paid more than $10,000 in state income taxes alone. So, once the new limit was put into effect, many owners couldn’t deduct as much as they previously could on their federal tax returns.
In November of 2020, the IRS issued Notice 2020-75, which vindicated a workaround to this credit. This prompted many states that hadn’t already implemented an elective Pass-through Entity (PTE) tax to do so. In Minnesota, the new PTE tax election is available … Read More
MN Department of Revenue tax form error for 2019 and 2020
Recently Minnesota residents in the highest tax bracket have been receiving letters from the Department of revenue about taxes owed from 2019 and 2020. This was equally surprising for both tax preparers and taxpayers. The issue was caused by the MN Department of Revenue. So, despite tax preparers following the rules provided, taxpayers still owe this amount because the Department of Revenue provided the wrong information to the tax preparers.
In 2019, a change was made to the standard income tax deductions. Unfortunately, the MN Department of Revenue didn’t update its tax forms to reflect these changes. In short, the error was that standard deduction limitations were reduced by 20% when they should have been reduced by 80%. As a result, thousands of individuals in the highest tax bracket owe taxes from 2019 and 2020 despite following the forms provided by the department of revenue. In total, 38.4 million dollars will … Read More
Donor-Advised Funds
A donor-advised fund (DAF) is a charitable giving account controlled by a Section 501(c)(3) organization. This is known as your sponsoring organization and they control the fund, that you contribute to. You control when the money is distributed and who receives the money, but the fund owns the assets in your account. For example, if you add $10,000 dollars worth of assets to your fund’s account, you would receive $10,000 in charitable deductions that year. Then, you can decide when you want to donate assets from the account. Any assets you don’t distribute continue to grow tax-free, but they are now owned and controlled by the sponsoring organization. Depending on when you distribute your assets and the rate at which your account grows, you will likely be able to donate more than the initial contribution of $10,000.
What can you contribute?
You can donate many types of assets to a … Read More
Minnesota pass-through entity tax credit
Taxpayers that itemize their deductions can deduct certain state and local taxes (SALT). These SALT deductions can include property, income, and sales tax. Although all three are eligible, taxpayers must choose between deducting income tax or sales tax, while property taxes are always eligible. In 2017, when the Tax Cuts and Jobs Act was signed, the previously unlimited SALT deductions became limited to $10,000. Many pass-through entity (PTE) owners located in states with high income taxes paid more than $10,000 in state income taxes alone. So, once the new limit was put into effect, many owners couldn’t deduct as much as they previously could on their federal tax returns.
In November of 2020, the IRS issued Notice 2020-75, which vindicated a workaround to this credit. This prompted many states that hadn’t already implemented an elective Pass-through Entity (PTE) tax to do so. In Minnesota, the new PTE tax election is available … Read More