Rhode Island Enacts Pass-Through Entity Level Tax

RI New Legislation – Gentile Stephen T CPA

The new legislation amends the state’s Business Corporation Tax by adding an elective pass-through entity-level tax effective for tax years on or after January 1, 2019. Entities now may elect to be taxed at the entity level. A qualifying pass-through entity includes a corporation, that is an S corporation or general partnership, limited partnership, limited liability partnership, trust, limited liability company or certain unincorporated sole proprietorships.

The pass-through entity may elect to pay the state tax at the entity level at a rate of 5.99%. This election would replace the payments required for nonresident withholding.

The amount of the entity level tax paid will be allowed as a credit on the owner’s tax return.
The entity level tax will be a RI modification increase.

Read more about Stephen Gentile.

Gentile Stephen T CPA
109 Airport Rd, Warwick, RI 02889
(401) 739-6110

House Mortgage Interest Deduction

Catching up with the house Mortgage Interest Deduction

A house is the foremost valuable plus many folks own. So, it’s vital to stay awake to the tax impact of home possession and to rigorously track the debt you incur to shop for, build or improve your home-known as “acquisition indebtness.”

Among the most important tax perks of shopping for a house is the flexibility to deduct your mortgage interest payments. However, this deduction has undergone some changes recently, therefore you’ve got to do some catching up.

mortgage interest RIBefore the passage of the Tax Cuts and Jobs Act (TCJA) late last year, a payer might deduct the interest on up to $1 million in acquisition indebtness on a principal residence and a second home. And this still holds true for mortgage debt incurred before December 15th, 2017. However, the TCJA tightens limits on the itemized deduction otherwise.

Specifically, for 2018 to 2015, it typically permits a payer to deduct interest solely on mortgage debt of up to $750,000. The new law typically suspends the deduction for interest on home equity debt: For 2018 to 2025, taxpayers can’t claim deductions for such interest, unless the payoff is to build or well improve the taxpayer’s principal or second home.

Step rigorously if you own a second residence and use it as a rental. For a home to qualify as a second home for tax functions, its owner should use it for over fourteen days or bigger than 10% of the amount of days it’s rented out as honest value (whichever is more). Failure to satisfy these qualifications means that the house is subject to totally different tax rules.

Please contact our firm for help in properly deducting mortgage interest and to see how other aspects are impacted for your personal tax planning.

Gentile Stephen T CPA
109 Airport Rd, Warwick, RI 02889
(401) 739-6110

Developing a Household Budget

Tax tips from Warwick RI accountants Stephen T. Gentile C.P.A.

When developing a household budget, the first thing to do is to summarize what you are currently spending. You generally want at least three months summarized, but six to twelve months is better. You can develop this summary in one of several ways: 1) pencil, paper and adding machine, 2) a spreadsheet such as Excel (there are some templates that might help), or 3) one of several programs like Quicken. The primary purpose of this exercise is to identify where you are currently spending your money.

You should then classify the items you are currently spending into three basic groupings: 1) Recurring Expenditures (such as mortgage, utilities, food and other recurring monthly expenses). 2) Financial Goals (such as funding your 401k or IRA, health insurance, college expenditures) and 3) Discretionary Spending (such as recreational items and hobbies).
Look for benchmarks to use as a guideline. Below are some suggested benchmarks for categories of spending. The percentages are expressed in relation to total household income. However I offer this warning, “one size does not fit all.” These percentages are only suggestions and care should be used when considering your personal financial circumstances.

1. Housing 25%
2. Utilities 8%
3. Food 14%
4. Clothing 4%
5. Medical/healthcare 6%
6. Charity 4%
7. Savings/Insurance 10%
8. Entertainment/Recreation 5%
9. Transportation 14%
10. Other debt or discretionary 10%

In most families, developing a budget can be a difficult matter. A budget, however, is an important tool to set financial goals and realign spending that will ultimately help to achieve your financial goals.

For more information of this topic or any other financial or tax matter, please call (401) 739-6110, email us or visit our website here http://gentilecpa.com/.

Gentile Stephen T CPA
109 Airport Rd
Warwick, RI 02889
(401) 739-6110

Avoid Gift Treatment by Paying Expenses Directly

RI CPABrought to you by Stephen T GENTILE CPA

The annual exclusion for gifts remains at $14,000 for 2015(married couples can gift up to $28,000 combined). This limit applies to the total of all gifts, including birthday and holiday gifts, made to the same individual during the year. However any payment made directly to the medical care provider or educational organization for tuition is not subject to the gift tax and, therefore, is not included in the $14,000 limit.

So when paying tuition or large medical bills for parents, grandchildren or any other person who is not your dependent minor child be sure to make the payment directly to the organization or service provider. Don’t give the funds to the parent or other individual first and have them pay the school, doctor or hospital. By doing so, you have made a gift to that person, subject to the $14,000 limit. In summary, make direct payments to schools or medical providers and avoid taxable gifts that could be subject to the gift tax or reduce the payer’s unified credit.

Caution: Direct payments of tuition reduce the student’s eligibility for financial aid on a dollar-for-dollar basis. However, if the gift were made directly to the student, only 20% of the gifted assets would be counted as assets of the student for financial aid purposes. Accordingly, careful analysis of the trade-offs between the gift tax exclusion and impairment of financial aid eligibility should be considered.

Gentile Stephen T CPA 109 Airport Rd Warwick, RI 02889 (401) 739-6110