Mckenna’s Recent Posts

Can You Offset Capital Gains with Losses from Prior Years?

A realized loss during a year can mean a lower tax bill. This loss is generally offset against other gains or income. Some people refer to this as shielding taxable income. However, there are rules on how losses are applied against income. What about losses from previous years? Do the same rules apply? Let’s find out.

Jan 31, 2023

What Can Be Deducted from Capital Gains?

Capital gains happen after the fact. They are the result of deductions that have already been made. Reducing capital gains must start before arriving at a capital gains figure. In this article, we’ll see how to reduce capital gains, which will, in turn, reduce taxable income.

Jan 27, 2023

Are There Tax Advantages to Owning Rental Property?

Direct real estate investments have a few tax advantages that passive real estate investing doesn’t. Of course, direct real estate means more work. Passive real estate investing is just that, passive and mainly hands-off, except for some managing of the investment. Passive investors don’t have to deal with tenants or repair buildings.

Jan 18, 2023

Are Dividends Taxed as Ordinary Income?

Dividends are payments that a corporation distributes to the shareholders, often quarterly but at least annually. Not all public companies pay dividends, but some pay them reliably. Some examples include Exxon Mobil, Verizon, Enbridge, VF Corp, Unilever, and 3M. In addition, some companies have a long history of paying dividends, including DuPont, Edison, General Mills, Eli Lilly, and Stanley Black & Decker. Dividend-oriented investors may rely on these payments, and some companies have encountered an investor backlash when they have reduced or dropped their dividends (often due to financial hardship).

Jan 13, 2023

What Is An Intentionally Defective Grantor Trust (IDGT)?

Intentionally Defective Grantor Trusts (IDGT) are when a grantor transfers an asset, or assets, into a trust where the asset and any growth are effectively removed from the estate, but the grantor still pays income tax. Effectively, the grantor’s purpose is to potentially grow the inheritance “income tax-free” for their heirs by paying the income taxes as the asset grows while they are still alive. By setting up an IDGT the grantor is “intentionally” triggering the need to pay income tax on the asset. 

Jan 9, 2023

Can an Estate Use a Section 121 Exclusion?

The Section 121 exclusion is a great tax benefit for homeowners. It allows them to exclude taxes on gains up to a certain amount if they meet the Section 121 criteria. That’s nice for homeowners, but what if the home is within an estate? Does the home still get the exclusion?

Jan 4, 2023

Are Trust Funds Subject to Inheritance Tax?

Taxpayers may establish trust funds to pursue several goals, including orderly distribution of assets, tax management, and a desire to provide income to beneficiaries. Often, tax management is a priority. Keep in mind that federal estate taxes only apply when an estate's value exceeds $12.06 million. Very few estates meet that threshold. However, the tax rate imposed on amounts over the threshold is forty percent, which can take a hefty bite out of an inheritance.

Dec 30, 2022

Is Capital Gains Tax the Same as Inheritance Tax?

It seems as though just about everything in the United States is subject to some sort of tax. As an American citizen, you’re taxed on wages and earnings, the purchase of goods and services, and property ownership.  

Dec 17, 2022

Is There a Lifetime Limit on Capital Gains?

Capital gains are increases in the value of an asset relative to its basis. The capital gains tax is an assessment on that gain that applies when the asset is sold. So while an investor may watch and enjoy the appreciation in a capital asset, the tax doesn’t apply until they “realize” the gain—which occurs when they dispose of the investment.

Dec 7, 2022

What is Capital Gains Deferral?

Selling a real estate investment property can be a lucrative wealth-building opportunity. However, you should consider how capital gains tax may affect your decisions when selling property. Fortunately, a few strategies are available for deferring or avoiding capital gains taxes.  

Dec 4, 2022

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