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About Coach Janelle CPA

My passion is to help 6 & 7- figure+ earners see their financial possibilities through financial literacy and strategy. 

I want to help you save on taxes so you can keep more of your money to live the life you dream of and have worked for NOW, and build wealth and equity for the next generation.

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Check Out Some Of Our Latest Blog Post

Is Airbnb Rental Income Subject to Self-Employment Tax

Written by Coach Janelle CPA on February 3, 2023

Sometimes debts can pile up beyond a borrower’s ability to repay, especially if we are heading into a recession. But lenders are sometimes willing to cancel (forgive) debts that are owed by financially challenged borrowers. While a debt cancellation can help a beleaguered borrower survive, it can also trigger negative tax consequences. Or it can be a tax-free event.

When Cancellation of Debt (COD) Income Can Be Tax-Free

Written by Coach Janelle CPA on January 26, 2023

Sometimes debts can pile up beyond a borrower’s ability to repay, especially if we are heading into a recession. But lenders are sometimes willing to cancel (forgive) debts that are owed by financially challenged borrowers. While a debt cancellation can help a beleaguered borrower survive, it can also trigger negative tax consequences. Or it can be a tax-free event.

Use In-Kind RMDs to Avoid Selling Retirement Account Assets

Written by Coach Janelle CPA on January 19, 2023

Are you 72 or older? If so, you must take a required minimum distribution (RMD) from your traditional IRA, SEP-IRA, or SIMPLE IRA by the end of the year. If you turn 72 this year, you can wait until April 1 of next year to take your first RMD—but you’ll also have to take your second RMD by the end of that year.

Section 1031 Exchanges vs. Qualified Opportunity Zone Funds

Written by Coach Janelle CPA on January 13, 2023

Have you sold, or are you planning to sell, commercial or rental property? To avoid immediately paying capital gains tax on your profit, you have options: 1. Defer the capital gains tax using a Section 1031 exchange; 2. Defer the capital gains tax using a qualified opportunity zone fund

Last-Minute Section 199A Tax Reduction Strategies

Written by Coach Janelle CPA on December 28, 2022

Remember to consider your Section 199A deduction in your year-end tax planning. If you don’t, you could end up with an undesirable $0 for your deduction amount...

Last-Minute Year-End Retirement Deductions

Written by Coach Janelle CPA on December 22, 2022

The clock continues to tick. Your retirement is one year closer.
You have time before December 31 to take steps that will help you fund the retirement you desire. Here are four things to consider...

Last - Minute Year - End Medical Plan Strategies

Written by Coach Janelle CPA on December 14, 2022

All small-business owners with one to 49 employees should have a medical plan for their business. Sure, it’s true that with 49 or fewer employees, the tax law does not require you to have a plan, but you should. When you have 49 or fewer employees, most medical plan tax rules are straightforward. Here are six opportunities for you to consi...

Last-Minute Year-End Tax Strategies for Your Stock Portfolio

Written by Coach Janelle CPA on December 7, 2022

When you take advantage of the tax code’s offset game, your stock market portfolio can represent a little gold mine of opportunities to reduce your 2022 income taxes. The tax code contains the basic rules for this game, and once you know the rules, you can apply the correct strategies...

Last-Minute Year-End General Business Income Tax Deductions

Written by Coach Janelle CPA on November 30, 2022

The purpose of this letter is to get the IRS to owe you money. Of course, the IRS will not likely cut you a check for this money (although, in the right circumstances, that will happen), but you’ll realize the cash when you pay less in taxes. Here are six powerful business tax deduction strategies you can easily understand and implement before the end of 2022.

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How to Section 1031 Exchange into a Delaware Statutory Trust

Written by Coach Janelle CPA on February 3, 2023

As you likely know, the Section 1031 tax-deferred like-kind exchange is one of the greatest wealth-building mechanisms for real estate investors.

With Section 1031, you can avoid taxes on all your property upgrades during your lifetime and then pass the property to your heirs when you die. The heirs receive the property with a step-up to fair market value, and they can likely sell the property and pay no taxes.

But what if you want to get off the landlord bandwagon? There are options. For example:

          1. You could use an UPREIT.
          2. You could invest in an opportunity zone fund.
          3. You could invest in a Delaware statutory trust as we explain here.


1031 Exchange Overview

The 1031 exchange, or like-kind exchange, has been around since the Revenue Act of 1921. Its purpose is simple: allowing you to swap a business asset without there being a taxable event, because your economic position hasn’t really changed.


The basics of a 1031 exchange are pretty straightforward:

         1. Before you sell the old asset, you must begin the exchange by contracting with a
             qualified intermediary.

          2. You may list up to three potential replacement assets within 45 days of the sale
              of your qualified asset.

          3. You must close on at least one of those three identified assets within 180 days
               of the sale.

          4. For the exchange to be fully tax-free, you must acquire a new asset of greater   
              value than the one you’re selling. If you don’t trade up, you’ll likely have some  
              taxable gain.

IRC Section 1031(a) provides that no gain or loss is recognized on the exchange of real property held for productive use in a trade or business or for investment (relinquished real property) if the relinquished real property is exchanged solely for real property of a like kind that is to be held either for productive use in a trade or business or for investment (replacement real property).

Such Section 1031 assets include, among others:

          1. Residential or commercial real estate held for investment, rental, or business
              use
          2. Raw land held for investment
          3. Tenant-in-common-held real estate
          4. Delaware statutory trust interests

Assets that don’t qualify for Section 1031 include:

          1. Securities, stocks, and bonds
          2. Partnership interests
          3. Assets held as inventory
          4. Personal-use real estate
          5. Foreign real estate


What Is a Delaware Statutory Trust?

The Delaware statutory trust property ownership structure allows you (as a smaller investor) to own a fractional interest in large, institutional-quality, and professionally managed commercial property along with other investors. Note that with the Delaware statutory trust, you are an owner.

And it’s that ownership interest that makes an investment in a Delaware statutory trust a qualifying replacement asset for purposes of a 1031 exchange. Revenue Ruling 2004-86 confirms the Delaware statutory trust ownership and its qualification for a 1031 exchange.


Some Thoughts on Delaware Statutory Trust Investments

Liquidity. Delaware statutory trusts do not have a secondary market. This means your money is locked up in this investment, perhaps for up to 10 years.   

Minimum investment. In general, most Delaware statutory trusts require that you be an accredited investor. Such trusts do their own due diligence on your status, but in general you meet the requirements for classification as an accredited investor when

        1. your income is $200,000 or more ($300,000 with your spouse) over the past two
            years, and you reasonably expect such income for the current year; or
        2. your net worth exceeds $1 million excluding the value of your primary residence.


Lack of control. Unlike with property you own yourself, you don’t have control over the property in the Delaware statutory trust. Of course, you also don’t have the day-to-day landlord headaches.


Leverage. You have heard the saying that you should use other people’s money to increase your rate of return. In the real estate investment world, this is common—and it can work. But if you had no mortgage on your 1031 property, you should consider investing in a non-leveraged Delaware statutory trust to reduce the risk that you could lose your investment.


Backup for the 45-day rule. When you have to identify up to three properties under the 45-day rule and then buy one of them within 180 days, you play with fire. Consider naming two properties and using the Delaware statutory trust as a backup. Should the other properties fail, you would use the Delaware statutory trust to preserve your tax-deferred status and live to play the Section 1031 card another day.


Park your investment. If you think the market for buying property will be better seven to 10 years down the road, you could do a Section 1031 exchange into a Delaware statutory trust as a way to park your investment.

SAY GOODBYE TO 100 PERCENT BONUS DEPRECIATION 

Written by Coach Janelle CPA on November 9, 2022

All good things must come to an end. On December 31, 2022, one of the best tax deductions ever for businesses will end: 100 PERCENT BONUS DEPRECIATION.

Since late 2017, businesses have used bonus depreciation to deduct 100 percent of the cost of most types of property other than real property. But starting in 2023, bonus depreciation is scheduled to decline 20 percent each year until it reaches zero in 2027.


For example, if you purchase $100,000 in equipment for your business and place it in service in 2022, you can deduct $100,000 using 100 percent bonus depreciation. If you wait until 2023, you’ll be able to deduct only $80,000 (80 percent).


Does this mean you should rush out and purchase business property before 2022 ends to take advantage of the 100 percent bonus depreciation? Not necessarily. For many businesses, an alternative is not going away: IRC Section 179 expensing. Both IRC SECTION 179 EXPENSING and BONUS DEPRECIATION allow business owners to deduct in one year the cost of most types of tangible personal property, plus off-the-shelf computer software. 

Both can be used for new and used property acquired by purchase from an unrelated party. Both also can be used to deduct various non-structural improvements to non-residential buildings after they are placed in service. Moreover, the two deductions aren’t mutually exclusive. You can apply Section 179 expensing to qualifying property up to the annual limit and then claim bonus depreciation for any remaining basis. Starting in 2023, when bonus depreciation will be less than 100 percent, any basis left after applying Section 179 and bonus depreciation will be deducted with regular depreciation over several years.

Generally, there is no great need to purchase and place the property in service by the end of 2022 to take advantage of 100 percent bonus depreciation. But there can be exceptions.


For example, if you own a rental property and want to make substantial landscaping or other land improvements, you’ll get a larger one-year depreciation deduction using 100 percent bonus depreciation in 2022 than if you wait until 2023, when the bonus will be only 80 percent.
 

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Claim Your Employee Retention Credit  

Written by Coach Janelle CPA on November 24, 2022

If you had W-2 employees in 2020 and/or 2021, you need to look at the Employee Retention Credit (ERC). As you likely know, it’s not too late to file for the ERC. And now is a good time to get this done. You can qualify for 2020 credits of up to $5,000 per employee and 2021 credits of up to $7,000 per employee for each of the first three quarters. That’s a possibility of $26,000 per employee.

One of our clients—let’s call him John—had 10 employees during 2020 and 2021. He qualified for $260,000 of tax credits (think cash). You could be like John.

You claim and adjust the ERC using IRS Form 941-X, which you can file anytime on or before March 15, 2024, if you file your taxes as a partnership or an S corporation, or April 15, 2024, if you file on Schedule C of your Form 1040 or as a C corporation.

You have three ways to qualify for the ERC:


Significant Decline In Gross Receipts 

Here, you compare the gross receipts quarter by quarter to those in 2019. To trigger any ERC under this test, you need a drop of more than 50 percent in 2020 and a drop of more than 20 percent in 2021.

Government Order That Causes More Than A Nominal Effect

Here, your best bet is to use the safe harbor for nominal effect. This requires looking at either your 2019 quarterly receipts or your 2019 quarterly hours worked by employees and seeing that the 2020 or 2021 shutdown order would have affected the 2019 figures by more than 10 percent.

Government Order That Causes Modification To Your Business

Here, you also have a safe harbor. The IRS deems that the federal, state, or local COVID-19 government order had a more-than-nominal effect on your business if it reduced your ability to provide goods or services in the normal course of your business by not less than 10 percent.

The ERC can help all businesses that qualify, even those businesses that did not suffer during the COVID-19 pandemic.     

About Coach Janelle CPA

My passion is to help 6 & 7- figure+ earners see their financial possibilities through financial literacy and strategy. 

I want to help you save on taxes so you can keep more of your money to live the life you dream of and have worked for NOW, and build wealth and equity for the next generation.

Sign Up To Our Weekly Newsletter

Get the latest tax planning tips content delivered straight to your inbox.

 All Your Information is Protected When You Sign Up

Check Out Some Of Our Latest Blog Post

Buying an Electric Vehicle? Know These Tax Law Changes

Written by Coach Janelle CPA on November 21, 2022

There’s good and bad news if you’re in the market for an electric or plug-in hybrid electric vehicle. The good news is that the newly enacted Inflation Reduction Act includes a wholly revamped tax credit for electric vehicles that starts in 2023 and continues through 2032. 

Say Goodbye To 100 Percent Bonus Depreciation

Written by Coach Janelle CPA on November 9, 2022

All good things must come to an end. On December 31, 2022, one of the best tax deductions ever for businesses will end: 100 PERCENT BONUS DEPRECIATION.
Since late 2017, businesses have used bonus depreciation to deduct 100 percent...

The New 62.5 Cents Mileage Rate

Written by Coach Janelle CPA on August 29, 2022

The IRS noticed that average gas prices across the United States exceeded $5.00 a gallon and took action. Small businesses that qualify to use and do use the standard mileage rate can deduct 62.5 cents per business mile from July 1 through Decem...

Self-Employment Taxes for Partners and LLC Members

Written by Coach Janelle CPA on August 20, 2022

Does a member of a limited liability company (LLC) or a partner in a partnership have to pay self-employment taxes on the member’s or partner’s share of the entity’s income? Incredibly, the answer is not alw...

Paying Your Child: W2 or 1099?

Written by Coach Janelle CPA on August 8, 2022

Here’s a question I received from one of my clients: “I will hire my 15-year-old daughter to work in my single-member LLC business, and I expect to pay her about $12,000 this year. Do I pay her through payroll checks and file a...

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© 2021 Coach Janelle CPA. 
All Rights Reserved.

Follow me on socials

Sign up for our weekly newsletter

Get the latest tax planning tips content delivered straight to your inbox.

© 2021 Coach Janelle CPA. 
All Rights Reserved.

Follow me on socials

Sign up for our weekly newsletter

Get the latest tax planning tips content delivered straight to your inbox.