Scott Gilmore, Tax Professional and Managing Partner of Ascend Advisors, joined our CEO Jeff Sarti earlier this month to discuss tax planning opportunities and the new California deadline. Read the highlights below or click the thumbnail to watch the video.

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Tax Deadline Extended for California Residents

‍If you live in a storm-affected county in California (click here for a full list of eligible counties), you have a few more months to file and pay both federal and state taxes because the deadline is now October 16, 2023. You do not have to file an extension to qualify or prove you were directly impacted by the severe weather. This extension automatically applies to all types of taxes like business, personal, trusts, etc. It is important to note that if you owe out-of-state taxes, they are not extended.

‍1031 Exchange

‍Scott and Jeff also discuss changes to a 1031 exchange which generally allows one to defer paying capital gains taxes when you sell an investment property and reinvest the money from the sale in another property. To do this, the buyer must identify their new property within 45 days of the sale. Within 6 months of the sale, they must close on the new property. However, this new tax extension makes it so that if the end of the 6-month window fell before October 16, the deadline will automatically be pushed to October 16, 2023.

‍AB 150 rule

‍This is one of the more effective tax savings strategies out there and is fairly new.  People often refer to this as the SALT (state and local tax) deduction workaround.  It applies to owners of LLC’s and other flow through entities that are not disregarded for tax purposes.  AB150 (CA Assembly Bill 150) allows eligible taxpayers of flow through entities to make CA estimated tax payments relating to the income from the passthrough entity on behalf of their owners who elect in.  Effectively, this makes those estimated taxes a deduction against business income.  If paid from the owners personally, there would be no deduction for state taxes paid.

‍Write-offs

‍When it comes to write-offs, Scott says the tax code favors business owners. If you are a W-2 employee, it is difficult to write things off as the rules are extremely limited. If a client owns a business, Scott will ask them if they incurred a certain expense to help generate revenue for their company; if so, it may be considered a business expense that can be written off. However, entertainment expenses like golf or concerts are never deductible since a new rule was put in place in 2018.But, what if you’re not a business owner? Scott says investment interest expense is a deduction, so if you borrowed money to create funds to make investments, you can write off that interest.

‍Charitable Giving Strategies

‍Charitable donations are also a way to deduct taxes. Using appreciated securities to donate have an extra advantage.  If you donate appreciated stock to a non-profit organization, you can get a tax credit for the full value of the stock. For example, if you buy a share for $5 and donate it when it is worth $50, you will get a $50 donation write-off. This does not apply to any other donated asset- only publicly traded listed securities.Another option to consider regarding charitable giving is a Donor-Advised Fund (DAF) which is usually held by a custodian, like Schwab. You can make a considerable donation to a DAF and get a big deduction this year but instruct the custodian to release the money to your charity of choice in increments. Giving the charity a stream of consistent income helps them with budgeting and operations, and in the meantime, the money is compounding tax-free in the DAF. You can even put appreciated stock in a DAF. The limit to a DAF is the same as any charitable donation: 60% of your adjusted gross income.

‍Have questions about the different tax planning opportunities discussed in this session?

We’re here to help. Please reach out to your Morton advisory team to schedule a call. To learn more about Scott Gilmore and his tax planning firm Ascend Advisors, visit https://www.ascendadvisors.com/

‍DISCLOSURE:

‍Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your attorney, finance professional or accountant before implementing any transactions and/or strategies concerning your finances.