2021 Year-End Tax Planning

December 1st, 2021

There are just a couple of weeks left for 2021 year-end tax planning. There’s still time to project your 2021 tax results and make last-minute tax-saving recommendations. Whether you simply wish to anticipate the outcome of this year’s filings to prepare financially or to mitigate the taxes as much as possible, now is the time to plan. The challenging environment may have negatively affected your ’21 income, in which case there could be opportunities for realizing capital gains and converting taxable retirement plans. Review your taxable investment accounts for potential loss harvesting.

Key Tax Updates:

The 2018 tax bill eliminated Unreimbursed Employee Expense deductions at the federal level.  As an employee, you can no longer write off any work-related expenses, including a home office deduction at the federal level.  And yet, many employees are still working from a home office.  The best workaround to write off business expenses, including a home office deduction, is to set up a side business, “side hustle.”  We can help you choose and set up the proper business entity for 2021.   The window of opportunity to set up the entity is closing, so call us now!  

  • Incur business necessary business expenses in 2021 or prepay 2022 expenses using the IRS safe harbor rules.
  • With bonus depreciation and increased limits for expensing equipment, you may be able to deduct 100 percent of last-minute costs in 2021.
  • Remember that a business credit card charge expense is deductible the day you charge, regardless of when the credit card payment is made.
  • Cash basis entities can defer billings until January of 2022 to defer income.
  • Maximize your employee pre-tax plans, such as 401(k)s, 403(b)s, Health Savings Accounts (HSA), Dependent Child Care Flexible Spending accounts increased to $10,500 annual limit for 2021!
  • California’s AB150 created a workaround for the state tax deduction, State and Local Tax (SALT) cap of $10,000.  It creates an elective tax that allows state taxes on pass-through income to be paid at the entity level.  Qualified owners can make the election to pay the elective tax at a rate of 9.3% on the qualified owner’s share of net income.

We have a lot of flexibility to work together in person in Los Angeles or San Diego or by phone or video conference!  Call or e-mail to schedule tax planning time to minimize your 2021 taxes!

Please contact Brenda@taxplus.com or call 310.398.3231 to request a phone or video conference with one of our Enrolled Agents. Contact Rita@taxplus.com  or call 858.279.1640 for our San Diego office.

We look forward to working remotely with you!

TaxPlus Team