Important Facts About the New Laws on Mortgage Interest Tax Deduction

real estate accounting services duluth gaIf you are one of the millions of Americans who own your own home, you should be thinking about how President Trump’s latest tax bill helps or dents your finances; particularly when it comes to the ever-popular mortgage interest deductions. This article should put you ahead of the subject.

First off, if you are a homeowner with no intentions of changing anything soon, your mortgage deductions are unaffected (with a couple of exceptions we deal with below).

ISo in the main, the new laws apply only to those buying a home after 15th December 2017. If you fall into this category it boils down to understanding 3 key items:

  • There’s a cap of $750,000 (previously $1 million) on your total mortgage value (covering private and secondary homes in aggregate) that qualifies for interest deduction.
  • Discussing interest rate deduction on new home purchase goes hand-in-hand with the cap placed on Property Tax Deduction – now set at $10,000 (previously unlimited).
  • The Standard Deduction has been nearly doubled for all categories of tax filers in 2018 onwards.

Logically, anyone who intends buying in expensive locations or/and locations with property taxes above $10,000 should stop to think about it:

  • High property prices of course generally call for higher mortgage financing, And it often happens that premium locations are also the ones with the highest real estate taxes – a double whammy effect if you will.
  • In situations like this, it seems that the traditional enthusiasm around interest rate deductions may become somewhat jaded. It gives a whole new meaning to the popular realtor’s mantra, “location, location, location!”

The one escape hatch is to simply forget about itemizing interest payment and property tax claims; go to the expanded Standard Deduction now provided. But then again, the apparently increased relief offered by this new provision should be viewed alongside the knowledge that individual personal exemptions have been removed – which brings family size into the equation. If you have a lot of dependents (e.g. children or elderly parents) you may find yourself after all is said and done unchanged – or worse still, going backward.

Here’s another curveball that throws the cat amongst the pigeons: irrespective of when you bought or intend to buy your home/ homes (i.e. before or after the December 2017 law, it’s all the same) interest on second mortgages and on mortgages attached to unrented vacation residences is no longer deductible. Period. Given this, and all the other considerations are drawn into the conversation (as outlined above), it is impossible to provide a quick “catch-all” solution on interest rate deductibility. We can say this, however:

  • It is likely there’ll be a homebuyer movement away from expensive property purchases for the foreseeable future, resulting in a growing tendency to relocate to tax-friendlier regions.
  • The upper-middle class homebuyers will need to analyze these new tax provisions with a fine toothcomb, and even consider renting out vacation homes for part of the year to bring interest rate deduction back into the equation.
  • Those buying at home prices under the $750,000 cap limit with under-$10,000 property tax limits should have a far easier passage.

Conclusion: It’s at times like this that astute tax advice paves the way forward and dispels doubt. As you can see there are numerous considerations, especially for larger families and those fortunate enough to own more than one home. Also, those on the cusp of relocating should be looking at all the variables as well as state taxes before making the move. Our team is geared to answer your questions on every aspect of real estate related deductions. Contacting us sooner than later may be the wisest decision you can make this year.

Whether your business focuses on property management, development, investing, or if you’re a real estate broker or agent, Roe CPA, P.C. is ready to support all your tax and accounting needs. Call us at 404-504-7051 today for more information or request a free consultation online now.

Using Purchase Orders in QuickBooks Online

QuickBooks Online Plus offers the ability to create purchase orders. But they require knowledge that may be foreign to you.

If your business purchases products from vendors that you then sell, you may have occasion to use purchase orders. These forms simply tell your suppliers what items you want to buy from them.

Not all companies that you buy from will require purchase orders. However, if you place an order without one and the wrong items are delivered, you won’t be able to prove that your order was filled incorrectly.

Purchase orders add an additional layer to your bookkeeping – one that can improve accuracy and accountability, but that’s also complex. If you want to take them on, we’d like to introduce you to the concepts you’ll need to learn. You can, though, begin the process on your own to start familiarizing yourself with purchase orders.

Readying QuickBooks Online

QuickBooks Online Plus contains purchase order templates. You’ll fill these out much like you complete an invoice. And like invoices, purchase orders should include as much detail as is possible to ensure accuracy.

Before you can begin, though, you need to make sure that purchase orders are turned on. Click the + sign at the top of the screen and look at the Vendors list. If Purchase Order is there, click on it to open a blank template.

If not, click on the gear icon next to your company name in the upper right corner, then click Settings | Company Settings. Click the Expenses tab on the left. Click in the box to the left of Use purchase orders.

Figure 1: You may have to go to the Company Settings page to turn on purchase orders and define custom fields in QuickBooks Online.

Now the Purchase Order link will appear when you click the + sign at the top of the screen. You’ll also be able to create purchase orders by clicking Vendors in the left navigational pane, and then clicking the drop-down arrow in the ACTION column.

QuickBooks Online lets you define up to three custom fields for these forms. That is, you can add additional fields that will appear on all of your purchase orders. Consider your entries here carefully.

If you want to create your own transaction numbers, click in the box in front of Custom transaction numbers. If you don’t, QuickBooks Online will automatically assign them. When you’ve finished by entering a default message for these forms (optional), click Save.

Creating a Purchase Order

If you’re not already there, click on the + sign at the top of the page and select Vendors | Purchase Order. QuickBooks Online’s Purchase Order form will open without any fields filled in. In the upper left corner of the screen, click on the small up/down arrow to the right of the first field to open your list of vendors. Select the one you want.

Figure 2: QuickBooks Online’s Purchase Order form resembles the invoice form, except you’re ordering rather than selling here.

Directly below that, you’ll see the word Open, with a drop-down arrow next to it. A purchase order is considered Open until you pay for it, at which point the status changes to Closed.

If you want the item(s) shipped directly to a customer, click the up/down arrow to the right of the field under Ship to, and select the right one. If this remains blank, the shipment will be delivered to your business mailing address.

The date should fill in automatically, but you can change it. Enter a courier name in the Ship via box, and fill in any custom fields you’ve created.

That’s the easy part. You’ll notice in the screen shot above that there are two sections below the information you just entered, Account details and Item details. Knowing when to fill in one or the other – or both – takes some advanced understanding of purchase orders. This is where you’ll need some guidance from us.

Paying for the Goods

When you receive the items you ordered and are ready to pay for them, your purchase order information will be available. If you select the vendor from the screen shot above and want to write a check, for example, this box will appear in the right vertical pane when you select his name.

Figure 3: Purchase order information will be displayed when you pay the vendor.

The purchasing process is second only to payroll in terms of bookkeeping complexity. QuickBooks Online provides the tools you’ll need, and we can help you gain the understanding required.

Social media posts

Has a vendor asked you for a purchase order? QuickBooks Online can create them, but you’ll need our help to understand the process.

Do you regularly transfer money between two accounts? QuickBooks Online now lets you create a rule to manage this process.

There are multiple styles for QBO invoices, sales receipts, and estimates. Click the gear icon in the upper right, then Custom Form Styles.

If you’re only running sales, expense, and purchases reports, you’re missing the big picture. Let us analyze critical financial reports.

Making a Year’s Profit in a Seasonal Business

ThinkstockPhotos-519122648Running a business takes an enormous amount of time and energy. It’s not easy keeping up with all the details, so many business owners seek help from Roe CPA, P.C., an Atlanta CPA firm with extensive experience in all facets of small business accounting.

If you have a seasonal business, you most likely face some challenges that year-round businesses don’t. After all, trying to squeeze a year’s worth of business into a far shorter period can get pretty hectic. Here are some tips that may help.

Cash Control

All small business owners have to be careful cash managers. Strict management is particularly critical when cash flows in over a relatively short period of time. One very important lesson to learn: Control the temptation to overspend when cash is plentiful.

Arming yourself with a realistic budget and sound financial projections — including next season’s start-up costs — will help you maintain control. And you may want to establish a line of credit just in case.

In the Off-season

It’s difficult to maintain visibility when you aren’t in business year round. But there’s no reason why you can’t send your customers periodic updates via e-mail or snail mail. You’ll certainly want to announce your reopening date well ahead of time. You can also spend time developing new leads and lining up new business.

Time for R and R

You deserve it, so take some time for rest and relaxation. But you’ll also want to use the time you’re closed to make any necessary repairs and take care of any sprucing up you’d like to do. You can also use the off-season to shop around and look for deals on items you keep in stock and/or equipment you need to buy or replace.

Expansion Plans

If you’re thinking of making the transition from “closed for the season” to “open all year,” start investigating new product lines or services. If you diversify in ways that are complementary to and compatible with your core business, your current customer base may provide support right away. A well-thought-out expansion can be the key to a successful transition into a year-round business.

Being the owner of any type of business has its rewards — and its challenges. We have a lot of experience working with small business owners and would be happy to assist you in any way we can.

To learn more tips about how to increase the bottom line of your seasonal business, give us a call today at 404-504-7051. Our staff of trained and experienced professionals will be happy to answer all of your questions. Or, request a free consultation online.

Understanding The Financial Differences Between Home Renovations

Some improvements are likely to increase your home’s value. However, others may actually decrease potential buyers’ interest in your home. So, put away your toolbox until you know more about projects that typically don’t pay.

Too Much Improvement

When you remodel your house, it should be in keeping with your neighborhood. Having your house stand out as the nicest one by far is often not a good thing when you’re trying to sell. Too much improvement may not pay off since the market price of your house may be limited by your neighborhood’s home values.

House Unusual

Unusual renovations, such as converting a garage into a home gym or adding a backyard basketball court, could turn off potential buyers. Another thing to consider is keeping things standard shapes and sizes throughout the home. You also may want to stick with standard sizes and heights for countertops and kitchen and bathroom fixtures.

Amateur Workmanship

Don’t do it yourself if you’re not handy. First of all, the results will probably show that you didn’t hire a professional. And secondly, structural mistakes and building code errors will show up during a home inspection. If your home fails an inspection, you could either lose a sale or be forced to lower your selling price.

To learn more about how to make most of your home as an asset give us a call today. Our Atlanta Accounting and Tax team is always available to answer any questions you may have. Call us at 404-504-7051 or request a free consultation online.

Customize QuickBooks Forms for a More Professional Image

Want an easy, free way to make your business look more professional and polished? Customize your forms. QuickBooks has the tools.

You probably don’t get as many paper forms in the U.S. Mail as you used to. But when you do, do you draw conclusions about the business that sent them based on what their forms look like?

Whether or not you think you do, most people make judgements on businesses based on collateral materials. You might notice that there’s no company logo, or that there are unnecessary blank fields. Maybe the print is very light or blurry, and there’s no message at the bottom thanking you for your business and your payment.

How you present yourself on paper does matter. There’s a lot of competition out there, and you need to use all of the tools available to you to stand out. QuickBooks provides one way to do so with its simple forms customization features.

Getting Started

To see what forms are available for customization, open the Lists menu and select Templates to open this window:

Figure 1: QuickBooks’ Templates window shows you what forms can be customized and provides tools for working with them.

Before you try your hand at customizing a form, make a copy to work with first. Highlight Intuit Product Invoice. Click the down arrow next to Templates in the lower left, and select Duplicate. A small window will open, displaying your options. Select Invoice and click OK.

QuickBooks will then take you back to the Templates window, and you’ll see a new entry labeled Copy of: Intuit Product Invoice. Right-click on it and select Edit Template from the menu that opens. This will open the Basic Customization window.

There are two parts to this screen. The editing options for the template you selected will appear on the left, and a preview of your invoice will display on the right. As you make modifications to the template, the preview will change to reflect them.

The best, most noticeable thing you can do to customize your invoice is to add a logo. Click the box in front of Use logo, and locate the file in the computer directory that opens. Double-click it. You logo will appear to the left of your company name and address in the upper left corner of the preview.

Figure 2: The Basic Customization window displays options for modifying your copy of the Intuit Product Invoice template.

You can make numerous changes to your template in this window, like:

  • Selecting a new color scheme,
  • Changing fonts,
  • Deciding how much of your contact information should appear, and
  • Indicating whether the Print Status Stamp (PAID, PENDING, etc.) should appear where appropriate on your invoices.

Note: You can choose to use the same modified design on multiple types of forms. This is a little complicated; let us help you.

More Customizing Options

 

The changes you just made were fairly superficial. However, QuickBooks offers tools that let you go much further, modifying the actual content of the invoice itself, its columns, and its fields. To get started on this, click the Additional Customization button at the bottom of the screen. The window that opens displays a preview of your invoice on the right side, just like in the previous window.

Your customization options appear on the left side, divided into five different sections. You’ll work primarily with three of them for your invoice:

Header. This includes all of the information that appears on about the top third of the form, like Bill To, Terms, Due Date, and Project/Job.

Columns. What are you billing the customer for? Item, Description, Quantity, Rate, etc.

Footer. What information will you want to enter after you’ve completed the invoice’s product or service content? You’ll likely want fields like Total, Balance Due, and Payments/Credits, perhaps a Message.

Need more QuickBooks assistance? Contact our Atlanta CPA Firm and our QuickBooks professionals for more information at 404-504-7051 or request a free cosultation online.

Does The Sale of Your Home Qualify For A Federal Income Tax Exclusion?

So, you’ve sold your home and made a nice profit on the sale. Now you may be wondering if Uncle Sam is entitled to a cut of this profit. Although gain on a home sale is potentially taxable, you may qualify for a federal income-tax exclusion.

The Rules in General

If you’re a single taxpayer, you may qualify to exclude gain of up to $250,000 if you owned the home and used it as your principal residence for at least two of the five years before the sale. Married couples who file jointly may exclude up to $500,000 of gain as long as one spouse owned the home — and both spouses used the home as a principal residence — for two of the last five years.

The Frequency Factor

The exclusion is generally available to sellers only once during a two-year period. A married couple is entitled to the $500,000 exclusion only if neither partner used the exclusion within the two-year period that ended on the sale date.

Reduced But Available

Even if you don’t meet the criteria described above, you may still qualify for a reduced exclusion (of less than $250,000 or $500,000) if the primary reason for the home sale was a change in the location of your employment, a health condition, or certain other “unforeseen” circumstances. The affected individual can be you, your spouse, a co-owner of the residence, or a person sharing your household. You may also qualify for the reduced exclusion if you sell your home to care for a sick family member.

Additional restrictions on gain exclusion may apply if you’ve rented out your home, maintained a home office, or turned a second home into a principal residence.

For more help with individual or business taxes, connect with us today. Our team can help you with all your tax issues, large and small.

Know Your Tax Requirements for Your Rental Properties

Woman inspecting house interiorFor years, owners of rental properties that show a tax loss have had to contend with the tax law’s “passive loss” limitations. With limited exceptions, real estate rental losses may be used only to reduce passive income — the rental losses are not currently deductible against nonpassive income, such as salary.

Now, owners of real estate rental properties that show a profit also face a potential tax headache. In addition to regular taxes, their profits could be subject to the 3.8% surtax on net investment income first introduced in 2013.

A Break for Real Estate Professionals

Taxpayers who can demonstrate that they “materially participate” in their real estate rental activities as “real estate professionals” may be able to avoid both the passive loss limitations and the 3.8% surtax on rental income. However, the requirements are stringent.

Very generally, a real estate professional spends more hours working on real-estate- related trade or business activities during the year than working in non-real-estate trades or businesses. Additionally, the time spent on the real estate activities must total more than 750 hours during the year.

Material participation means regular, continuous, and substantial participation. IRS regulations contain seven tests for establishing material participation. Each rental property is separately evaluated for material participation unless the taxpayer makes an election to treat all rental real estate activities as one activity.

To avoid the 3.8% surtax, a real estate professional must also establish that his or her rental income was derived in the ordinary course of a trade or business. The IRS will presume this was the case if the taxpayer devotes more than 500 hours per year — or in five of the last ten years — to each real estate rental activity or to all real estate rental activities viewed as a group.

Give our Atlanta CPA firm a call today at 404-504-7051, so we can help you determine the right course of action for you. We specialized in Real Estate Accounting services, and understand the common financial issues real estate businesses are up against and will be ready to assist you with practical accounting solutions and tax strategies.

Must-Know Rules for the Self-Employed

If you’re in business for yourself, you know how challenging it can be to run your business and keep on top of your tax situation. Here’s a refresher on the tax rules you need to be aware of if you’re a self-employed sole proprietor or are thinking of becoming one.

Income Taxes

As you probably know, sole proprietors do not file a separate federal income-tax return for the business. Instead, they summarize their business income and expenses on Schedule C of their personal income-tax returns.

Be sure to keep complete records of your income and expenses. Deducting all your ordinary and necessary business expenses will help minimize your tax liability. If you have losses, these are generally deductible against your other income, subject to special rules relating to hobby losses, passive activity losses, and activities for which you were not “at risk.”

Self-employment (SE) Taxes

Any self-employed person who has net earnings of at least $400 from the business is subject to SE taxes on those earnings. SE taxes generally track the Social Security and Medicare taxes paid by employees and their employers and are partially tax deductible.

Quarterly Estimated Tax Payments

Your net SE income will be taxable whether or not you withdraw cash from your business account. Moreover, you may be subject to penalties if you fail to make appropriate quarterly estimated tax payments.

Home Office Deduction

If you work out of your home, you may be able to deduct a portion of the costs incurred to maintain your home. You also may be able to deduct commuting expenses incurred to travel from your home office to another work location.

Health Insurance Costs

When tax law requirements are met, you may deduct your health insurance premiums as a trade or business expense, including premiums paid for your spouse, dependents, and children under the age of 27.

Retirement Plan

If you don’t already have a tax-favored retirement plan, you may want to consider establishing one. Contributions to the plan would be tax deductible, within certain tax law limits. Types of retirement plans available to sole proprietors include solo 401(k) and simplified employee pension (SEP) plans.

Don’t deal with tax issues on your own. Call us right now at 404-504-7051 or fill out our free consultation form to find out how we can provide you with the answers you need.

How Does Refinancing Your Home Affect Your Taxes?

ThinkstockPhotos-495007813As the real estate market improves and mortgage rates remain low, many homeowners are considering refinancing their home mortgages. Following are some of the general tax rules for deducting the charges associated with refinancing. Roe CPA, P.C. is an Atlanta CPA Accounting Firm that can help you with all your real estate tax and accounting needs.

Interest

Interest on a refinanced loan will be deductible to the extent the loan refinances up to $1 million of home acquisition debt, plus up to $100,000 of home equity debt (limits are $500,000/$50,000 for married taxpayers filing separately). Home acquisition debt is a mortgage loan used to buy, build, or substantially improve a first or second home. Home equity debt is generally any other debt secured by a first or second home.

These limits, however, operate separately. For example, if a couple had $300,000 remaining in principal on their original mortgage loan and then refinanced that debt with a new $450,000 mortgage, they would be able to deduct the interest on only $400,000 ($300,000 plus $100,000). Interest on the remaining $50,000 would be nondeductible because that portion is in excess of the combined limits.

Points

Points paid for the refinancing of a loan that does not exceed the above limits are deductible over the life of the loan. However, any points paid in connection with the portion of a mortgage used to finance home improvements may be deductible in the year of the refinancing.

Penalties and Fees

Generally, a prepayment fee paid on the old mortgage is considered a payment of interest on that mortgage and, therefore, is deductible in the year it is paid.

However, other fees, such as those for credit reports, appraisals, and loan origination, are not deductible.

For more help connect with us today at 404-504-7051. Our Atlanta CPA tax team can help you with all your tax issues, large and small.

5 QuickBooks Reports You Need to Run in January

The new year has begun. Does your accounting to-do list look like a clean slate, or are critical tasks from last year still nagging?

Getting all of your accounting tasks done in December is always a challenge. Besides the vacation time you and your employees probably took for the holidays, there are those year-end, Let’s-wrap-it-up-by-December-31 projects.

How did you do last month? Were you ready to move forward when you got back to the office in January? Or did you run out of time and have to leave some accounting chores undone?

Besides paying bills and chasing payments, submitting taxes and counting inventory in December, there’s another item that should have been on your to-do list: creating end-of-year reports. If you didn’t get this done, it’s not too late. It’s important to have this information as you begin the New Year. QuickBooks can provide it.

A Report Dashboard

You may be using the Reports menu to access the pre-built frameworks that QuickBooks offers. Have you ever explored the Report Center, though? You can get there by clicking Reports in the navigation toolbar or Reports | Report Center on the drop-down menu at the top of the screen.

QuickBooks’ Report Center introduces you to all of the software’s report templates and helps you access them quickly.

As you can see in the image above, the Report Center divides QuickBooks’ reports into categories and displays samples of each. Click on one of the tabs at the top if you want to:

  • Memorize a report using any customization you applied.
  • Designate a report as a Favorite
  • See a list of the most Recent reports you ran.
  • Explore reports beyond those included with QuickBooks, Contributed by Intuit or other parties.

Recommended Reports

Here are the reports we think you should run as soon as possible if you didn’t have a chance to in December:

Budget vs Actual

We hope that by now you’ve at least started to create a budget for this coming year. If not, the best way to begin is by looking at how close you came to your numbers last year. QuickBooks actually offers four budget-related reports, but Budget vs Actual is the most important; it tells you how your actual income and expenses compare to what was budgeted.

Budget Overview is just what it sounds like: a comprehensive accounting of your budget for a given period. Profit & Loss Budget Performance is similar to Budget vs Actual. It compares actual to budget amounts for the month, fiscal year-to-date, and annual. Budget vs Actual Graph provides a visual representation of your income and expenses, giving you a quick look at whether you were over or under budget during specific periods.

Income & Expense Graph

You’ve probably been watching your income and expenses all year in one way or another. But you need to look at the whole year in total to see where you stand. This graph shows you both how income compares to expenses and what the largest sources of each are. It doesn’t have the wealth of customization options that other reports due, but you can view it by date, account, customer, and class.

A/R Aging Detail

QuickBooks’ report templates offer generous customization options.

Which customers still owe you money from last year? How much? How far past the due date are they? This is a report you should be running frequently throughout the year. Right now, though, you want to clean up all of the open invoices from last year. A/R Aging Detail will show you who is current and who is 31-60, 61-90, and 91+ days old. You might consider sending Statements to those customers who are way past due.

A/P Aging Detail

Are you current on all of your bills? If so, this report will tell you so. If some bills slipped through the cracks in December, contact your vendors to let them know you’re on it.

Sales by Item Detail

January is a good time to take a good look at what sold and what didn’t before you start placing orders for this coming year. We hope you’re watching this closely throughout the year, but looking at monthly and annual totals will help you identify trends – as well as winners and losers.

QuickBooks offers some reports in the Company & Financial and Accountant & Taxes categories that you can create, but which really require expert analysis. These include Balance Sheet, Trial Balance, and Statement of Cash Flows. You need the insight they can offer on at least a quarterly basis, if not monthly. Connect with us, and we can set up a schedule for looking at these.

Social media posts

January is a good time to run reports you didn’t have time to in December. Talk to us about which are most important.

QuickBooks provides templates for some reports that you probably need help analyzing, like Balance Sheet. We can help with these.

Have you explored QuickBooks’ Report Center? It offers a variety of tools and guidance for managing reports.

Did you create a budget last year? Now’s the time to run QuickBooks’ Budget vs Actual report.

Need more help with setting up QuickBooks or staff training to use the software. Contact our Atlanta CPA Firm at 404-504-7051 to learn more about our QuickBooks support and training services.