Write Off These Home Improvements to Save Money This Tax Season

painting walls at home

painting walls at home

With economic uncertainty looming over many American households, you may be wondering if there are home improvement deductions you can take advantage of to save money this tax season. The answer is a resounding yes!

Several home improvement and repair projects are eligible for deductions and can save you money on your taxes. From energy-efficient upgrades and medical-related additions and modifications to home office-related expenses, there are several options for households looking to leverage tax-saving deductions.

This post outlines home improvement expenses you can write off this tax season to save money. Keep reading to determine if you are eligible for any of these tax-saving opportunities.

Energy-Efficient Renovations

Investing in energy-efficient products is one way to save money this tax season. As part of the recently enacted Inflation Reduction Act of 2022, energy efficiency tax credits for residential upgrades were extended through 2032. This is great news for homeowners looking to save money this tax season.

If you’re looking to lower your tax bill this year, you may consider taking advantage of several energy-efficient tax credits and rebates, including:

The Energy Efficient Home Improvement Credit

The Inflation Reduction Act reintroduced the Energy Efficient Home Improvement Credit with special credits for installing energy-efficient insulation, windows, doors, roofing, and other energy-saving renovations. For 2022, you may be eligible to receive a credit of 10% of the costs of installing energy-efficient products. This credit limit will be bumped to 30% for the 2023 tax year. Read this fact sheet for more information on new credit limits for qualifying improvements such as energy audits, exterior doors and windows, and water heaters or heat pumps.

The Residential Clean Energy Credit

The Inflation Reduction Act increased the credit amount to 30% for the costs of installing qualified systems using solar, geothermal, wind, or fuel cell power to produce necessary utilities like electricity and water heaters in your home. The 30% annual credit drops to 26% in 2033 and 22% in 2034, after which the credit will expire. Take advantage while you can!

High-Efficiency Electric Home Rebates

This program provides rebates to low- and middle-income households who upgrade their appliances and utilities to high-efficiency models. For example, your family may be eligible to receive a rebate of up to $840 if you purchase an energy-efficient stove, or up to $1,6000 if upgrading your home’s insulation.

If your total annual income is less than 150% of the median income where you live, you are eligible for this rebate and should leverage it to save money this tax season.

Medical-Related Improvements

a wheel chair in a plain background

If you, your spouse, or your dependent(s) require permanent home improvements as part of medical-related care, you can deduct certain related expenses from your tax bill. Taking care of yourself and your loved ones is a taxing process that often involves modifications to your daily routine.

Improvements to your home that are necessary for the medical care of you or your family are fully deductible, so long as they fit set criteria. The following are examples of medical care-related improvements that you want to deduct from your taxes to save money:

  • Adding entrance and exit ramps for wheelchair accessibility or ease of mobility
  • Expenses to widen hallways and interior and exterior doorways
  • Modifying kitchen cabinets and counters
  • Installing support bars and railings in bathrooms and around entrances and exits to your home
  • Adding lifting mechanisms to the exterior of your home or inside as a means to get from one floor to another
  • Modifying alarms, smoke detectors, or other electrical fixtures
  • Modifying certain landscaping features such as grading areas around your home

This is just a snapshot of the expenses that can be deducted to save you money on your tax bill. Check out IRS Publication 502 for a full list of medical-related home improvements that may be deductible.

You should note: any expenses that could be considered as increasing the value of your home – such as a swimming pool or other architectural designs – may not be deductible until, and if, you sell your home. It’s best to reach out to an expert CPA to discuss your unique situation.

Home-Office Improvements

The past few years have drastically changed the way many Americans work. While a large percentage of citizens conduct business operations from a home office, more and more business owners are adopting a home office base.

Several deductions exist for people who use their home as the principal business location and exclusively utilize space within their home to conduct their business operations. Unlike other deductions included in this post, home office-related repairs and improvements can be deducted from your taxes. The caveat here is that any repairs or improvements must only be in the part of your home you use exclusively to run your business.

While improvements are deductible through depreciation over a length of time, any repairs you’ve made this year can be deducted from your taxes on this year’s tax return. If you have an office or space in your home that qualifies for the home office deduction, you’ll be able to deduct the following expenses:

  • Repairs to windows and doors in the space
  • A percentage (relative to the ratio between your home and office footprint) of exterior maintenance and repair work, such as roofing, HVAC, and furnace repairs
  • A percentage of maintenance fees for pest control or extermination.

As you can see, the list of home office-related expenses is less robust than other categories in this post. However, if you use a room or space in your home exclusively for your business, there are still money-saving tax deductions you should take advantage of!

If you’re interested in writing off any home improvement deductions to save money this tax season, reach out to us. We bring together our friendly team and affordable services to make sure our clients never pay more than they have to.

How Having An LLC Can Help You Avoid Paying Too Much Tax

wooden blocks with llc written on it

wooden blocks with llc written on it

Choosing the right business entity for your company can have a huge impact on how you pay business income tax. Many businesses elect to set up their business with an LLC entity structure, opening up many tax-saving opportunities.

This post helps you understand the basics of paying taxes as an LLC entity, and the advantages of deductions and credits you can leverage to avoid paying too much in business income tax.

Taxes for LLC Explained

Before we get into the tax advantages of an LLC, it’s important that we lay the groundwork for how LLC taxes work. At the federal tax level, LLCs are considered pass-through entities. This means that LLCs (as well as sole proprietorships and S-corps) are not taxed on the entity level. Rather, any income generated by the LLC is passed to the business owners who then pay taxes on that business income on their personal income return. Although not all states levy a state-based LLC tax, you should check to see the unique tax regulations in your state before proceeding.

How an LLC actually pays those taxes is another matter. The ownership structure of the LLC plays an essential role in determining how LLC taxes are paid. There are three ways to establish an LLC structure:

  • Single-member LLC
  • Multi-member LLC
  • C-corporation or S-corporation classification

Each of these classifications pays income taxes differently. Let’s dive deeper into each one.

Paying Income Tax as a Single-Member LLC

As the sole owner of an LLC, you have a few tax advantages. First, the IRS deems single-member LLCs as disregarded entities. This means that as the sole owner of an LLC, you are not required to file a separate income tax return for your LLC income. Instead, you report your LLC income and expenses on your personal income tax return. This process is the same for business owners operating a sole proprietorship.

Depending on the state in which you live, there may be additional LLC-related fees if you make over a certain amount of income. For example, LLCs in California incur an annual LLC tax of $800 and an annual fee proportionate to your LLC’s annual income. Other states impose franchise taxes along with the annual LLC tax. You must know how your state taxes LLC entities before deciding to incorporate your own business.

Paying Income as a Multi-Member LLC

calculating business tax with coins in the front

Similar to the single-member LLC tax structure, multi-member LLCs are considered pass-through entities. Each member of the LLC pays taxes on the LLC’s business income on their personal tax return, relative to their ownership share of the LLC.

Additional state taxes also apply to this type of LLC entity structure, and you should ensure you’re prepared to file at both the federal and state levels, according to your state’s regulatory guidance.

Paying Income Taxes as a C-Corporation or S-Corporation LLC

Single-member LLC and multi-member LLC entities have a reasonably straightforward income tax return process. However, things can be more complicated if you choose to classify your business as a C-corporation or S-corporation.

Paying income tax as an S-corporation begins similarly to the other LLC entity types. In this tax status, you are still considered a pass-through entity. However, you must prepare and file a separate K-1 form for each of the corporation’s shareholders to demonstrate each person’s earnings and deductions. Then, you file an annual tax return on Form 1120S, which you can read more about here.

If you decide to file as a C-corporation, you will be subject to the federal flat corporate tax rate of 21%. On top of the federal tax, state and local corporate taxes may also apply. To file C-corporation taxes, read more about filing Form 1120 here.

As you can see, setting up an LLC doesn’t have to be a daunting endeavor. Carefully consider how each entity’s business tax requirements work with your projected business income, and ensure you’re accounting for any state and local taxes that may apply.

Tax Advantages of an LLC

Now that we’ve how an LLC entity structure impacts your business and tax filing process, this next section highlights several tax advantages you should leverage as an LLC.

Qualified Business Income Deduction

The qualified business income deduction (or QBI as it is more commonly known) is a major tax advantage for pass-through entities like the ones we outlined above. This tax deduction allows eligible LLCs, partnerships, sole proprietorships, and S-corporations, to deduct up to 20% of qualified net business income on their taxes.

This tax deduction became available to pass-through entities for the 2019 tax filing season. In 2022, there are new income thresholds you should be aware of before filing for the deduction:

  • Married Filing Jointly has an income threshold of $340,100
  • All other filing statuses have an income threshold of $170,050

While this deduction expires after 2025, you should contact us to ensure taking advantage of this deduction is the right tax-saving move for your LLC.

Increased Contribution Limits

steps made of wooden blocks

Another tax advantage of setting up your business as an LLC is the increased contribution limits for your retirement accounts and life insurance policies. In the case of a retirement account, a single-member LLC can contribute up to 20% of net compensation. Multi-member LLCs may contribute up to 25% of net compensation.

Rules regarding SEP IRA depend on your particular entity structure, so it’s essential to speak with an experienced accountant to ensure you are following the appropriate tax laws. Set up a free consultation with us here.

While life insurance is not considered a business expense by the IRS, the federal agency does allow you to take advantage of tax-saving deductions in some cases. If you are an LLC, S-corp, partnership, or sole proprietorship, you may be able to deduct the life insurance premiums for you and any employees your business employs.

Other Tax Advantages of an LLC

There is a long list of business-related expenses you can deduct as an LLC business entity. Many of them may already be familiar to you, including business costs, office supplies, business taxes, utilities, and rent.

However, there are other deductions you should consider to help you avoid paying too much in business taxes as an LLC. These deductions include:

If you’re interested in other, lesser-known tax write-offs for your LLC, check out our recent article here. And if you need more information about filing for an LLC entity status, reach out to our expert CPA team to schedule a free consultation. We can help you navigate the filing process with the state and ensure you’re ready to file the appropriate tax forms for your entity.

Meta Description: Several home improvement and repair expenses are eligible for deductions and can save you money on your tax bill. From energy-efficient upgrades and medical-related additions and modifications to home office-related expenses, there are several options for households looking to leverage tax-saving home improvement deductions. This post outlines the home improvements you can write off this tax season to save money.

4 Reasons Why Outsourcing a CFO Saves You Money In Business

handshaking with an outsource cfo

handshaking with an outsource cfo

Outsourcing the CFO role can be a huge money saver for your business. The CFO is one of the most critical roles you can hire to ensure the financial success of your business, yet hiring the right person can be daunting.

There are several benefits to outsourcing your CFO, many of which can help your business save money. In this post, we’re outlining the four major ways outsourcing CFO services is a better financial move for your business than hiring an in-house employee.

From making cost-cutting decisions to streamlining your tax filing process, outsourcing CFO responsibilities gives your business the flexibility it needs to keep thriving.

Let’s dive into the four ways outsourcing CFO services can help your business save money this year.

Take the Bias Out of Cost-Cutting Practices

CFOs play a crucial part in the success of your business. One of the main functions of their role is to ensure your business can sustain its current business structure. Tasks like administrative management, risk assessment, and business goal planning are high on the list of a CFO’s responsibilities.

Traditionally seen as the right-hand of the CEO, a CFO must have their eyes on every big move your business makes. Making cost-cutting decisions is among the most challenging tasks a CFO will face. CFOs are often tasked with examining bloated overhead and making difficult firing decisions. While deciding to cut jobs and fire large swaths of employees is not easy for any executive, the fact is having an unbiased party making the difficult call is much easier for all involved.

An outsourced CFO helps your business identify areas, like payroll, where you can make cost-cutting moves to save money. By removing the emotional aspect of such decisions, you can feel confident to make those tough business moves with sound financial justification.

Remain Focused on Financial Goals

a black binocular sitting on top of a bag

Both in-house CFOs and outsourced CFOs wear many hats. However, a critical difference between hiring an outsourced CFO is that they are not bogged down by your business’s daily operations like an in-house CFO may be. In-house CFOs can quickly become time-strapped with team meetings, team management, and unnecessary paperwork. Instead of focusing on money-saving functions like closing financial gaps and managing cash flow, in-house CFOs can be distracted by other business-related functions. In fact, a recent report by Datarails indicates that CFOs spend around 10 hours per week on manual work rather than on strategic financial analysis.

Hiring an outsourced CFO means your budget, cash flow management, risk assessment, and financial reporting are all done off-site by a professional whose only job is to ensure your finances are running smoothly. Your business’s cash flow is the most critical part of staying financially solvent. It’s essential that the person you hire as your CFO has the time and mental energy to complete a routine in-depth analysis of your finances. These reports are critical in setting and achieving your business’s financial goals and saving you money.

Aid in Fundraising Campaigns

A chief function of any CFO is raising capital for the business. Fundraising can be necessary to ensure your business can keep up with cash flow needs. But ensuring your CFO has the right connections and knows how to navigate the choppy waters of fundraising campaigns can be daunting.

Luckily, this is where an outsourced CFO can help your business generate more money. Because outsourced CFOs are generally well-connected with other financial service professionals, they can cast a wider fundraising net than an in-house professional.

Leveraging their own entrepreneurial chops means getting connected with the right financing institutions and leaders much more quickly than asking an in-house CFO to start making the networking rounds. Most outsourced CFOs have a large network of financial professionals they can tap to help your business raise the capital needed to achieve your next big goal. Most importantly, while an outsourced CFO can save you money, it’s equally critical they know how to make you money.

Streamline Your Bookkeeping & Tax Filing Process

clock calculator and a pen side by side

While some CFOs identify as accountants, it is certainly not required to step into this executive role. This means that many businesses must hire both an in-house CFO and a separate CPA to help with tax filings.

Therefore, hiring a CPA who offers outsourced CFO services can help your business save money in the long run. Instead of onboarding a new in-house CFO – paying all the upfront costs associated with headhunting and salary negotiations – and paying a separate accountant to help with bookkeeping and tax filings, you can streamline the process by outsourcing your CFO functions.

Hiring an outsourced CFO who doubles as a trusted CPA is one of the best ways to save your business money.

Cook CPA Group’s outsourced CFO service gives you the best of both worlds. We provide expert CPA services alongside strategic CFO services with the intent to save your business money year after year. When you’re ready to explore what Cook CPA Group can offer, we encourage you to check out our outsourced CFO services package and book a free consultation call with Evelyn to get started today!

Meta Description: Choosing the right business entity for your company can have a huge impact on how you pay business income tax. Many businesses elect to set up their business with an LLC entity structure, opening up many tax-saving opportunities. Read this post to familiarize yourself with the basics of paying taxes as an LLC entity, and the advantages of deductions and credits you can leverage to avoid paying too much in business income tax.

The Right Way to File Your Business and Personal Taxes

woman planning budget for her business and working on taxes

woman planning budget for her business and working on taxes

Filing your business and personal taxes can be daunting, but it’s an important part of being a responsible business owner and citizen. By following the right steps and keeping organized records, you can ensure you’re paying the correct amount of taxes and avoid any potential penalties or issues with the IRS.

By ensuring you take the right steps in filing your taxes, you can count on the smooth operation of your business and compliance with IRS rules. This post guides you through some key steps to follow when filing your business and personal taxes.

Learn the process and best practices you can use to make the tax filing process as smooth and stress-free as possible.

Determine Your Tax Filing Status

One of the most important things you can do to file your business and personal taxes the right way is to determine your tax filing status. Your tax filing status will determine the tax rate and deductions you’re eligible for.

The five main tax filing statuses are:

  1. Single
  2. Married filing jointly
  3. Married filing separately
  4. Head of household
  5. Qualifying widow(er) with dependent child

Depending on the type of business you have and your location, you may be required to pay federal, state, and local taxes. Some common taxes that businesses may be required to pay include:

  • Income tax: This is a tax on the profits your business generates. Your income tax rate will depend on the size of your business and the tax bracket you fall into.
  • Sales tax: If your business sells goods and services, you may be required to collect and remit sales tax to the government. Your sales tax rate will depend on the location of your business and the type of goods or services you sell.
  • Payroll tax: If you have employees, you may be required to pay payroll taxes, which include Social Security, Medicare, and unemployment insurance taxes.
  • Property tax: If you own a business property, you may be required to pay property taxes to the local government.

In addition to these business taxes, you may also be required to pay personal taxes on any income you receive, including your salary or profits from your business.

Establish Diligent Record Keeping

looking for files in the folder

In order to file your taxes accurately, you’ll need to gather all necessary documents and information. Having necessary documents on hand means you have to keep on track with meticulous record keeping throughout the year.

Good recordkeeping includes keeping track of all income and expenses, as well as any deduction you are eligible for. Keeping good records makes it easier to file your taxes and will also help you claim all the deductions and credits you are entitled to.

If you aren’t diligent about record keeping, challenge yourself to keep the following documents organized next year:

  • W-2 form (if you’re an employee)
  • 1099 forms (if you’re an independent contractor)
  • Receipts for business expenses
  • Other important financial documents

Determine Your Business Structure

Your business structure will determine how you file your business taxes. If you’re a sole proprietor or single-member LLC, you’ll report your business income and expenses on your personal tax return.

On the other hand, if you have a partnership or multi-member LLC, you’ll need to file a separate business tax return (Form 1065) and issue K-1 forms to each of your partners.

If you have a corporation, you will need to file a corporate tax return through Form 1120 or Form 1120-S.

For more detailed information about filing business taxes, read our article here.

Choose the Right Tax Forms

wooden box with cross and check marks

There are many different tax forms you may need to file, depending on your business structure and the type of income you receive.

Some common forms for small businesses include:

  • Form 1040 – This is the main personal tax form most taxpayers use to report their income and claim deductions.
  • Schedule C (Form 1040) – This form is used by sole proprietors and single-member LLCs to report business income and expenses.
  • Schedule E (Form 1040) – This form is used to report income or loss from rental properties, partnerships, and S corporations.
  • Form 1120 or Form 1120-S – Corporations use these forms to report their income and expenses.
  • Form 1065 – This form is used by partnerships and multi-member LLCs to report their income and expenses.

Claim Deductions and Credits

As a business owner, you may be eligible for certain deductions and credits that can reduce your tax liability. Some common deductions include business expenses such as office supplies, travel and transportation costs, and employee benefits.

You may also be eligible for credits for things like hiring employees from certain disadvantaged groups or investing in renewable energy.

Click here for a list of lesser-known tax deductions.

File Your Taxes On Time

The deadline for filing your business and personal taxes is typically April 15th of each year. If you’re unable to file by the deadline, you can request an extension using Form 4868.

However, keep in mind that an extension only gives you more time to file your taxes – it does not give you more time to pay any taxes that you owe.

Pay Any Taxes Owed

If you owe any taxes, you’ll need to pay them by the deadline to avoid late fees and penalties. You can pay your taxes online, by mail, or in person at a local IRS office. By following these steps and working with Cook CPA Group, you can ensure that you’re filing your business and personal taxes correctly and avoiding any potential issues with the IRS.

What Size Company Needs a CFO?

three balls from largest to smalles on red background

three balls from largest to smalles on red background

Hiring a Chief Financial Officer (CFO) is an important decision for any business. But you may be wondering what size company needs a CFO. Considering the size of your business is a pivotal aspect of deciding to hire a CFO or an outsourced CFO to help you keep up with the financial side of the business.

If you run a small business, you may not need a full-time CFO, but you may benefit from the expertise of an outsourced CFO. For medium-to-large businesses, the decision to hire a CFO becomes imperative to the successful operation of the company.

The financial and tax experts at Cook CPA Group are well-versed in the financial operations of businesses big and small. We created this blog post to help you explore when it’s time to hire an outsourced CFO and what you should know before making the decision.

Hiring a CFO for a Small Business

For a small business, hiring an outsourced CFO can provide the financial guidance and advice needed to make informed decisions about your company. While hiring an in-house CFO seems like the conventional next step, consider the cost-saving advantages of hiring an outsourced CFO.

Your small business can benefit from the expertise of an outsourced CFO to create a budget, manage cash flow, and provide financial analysis to help you make the best decisions for your business.

For small businesses, it may be time to hire an outsourced CFO when the business is growing and you can no longer keep up with the finances on your own. An outsourced CFO can help you manage the finances, provide you with financial forecasting for better margins, and help you meet your financial goals.

Quick Tip: Are you a Sacramento-based small business? Check out 18 financial tips we compiled to help small business owners in the Sacramento area plan for a financially successful year.

Hiring a CFO for a Medium-Sized Business

owner of a medium business working on their inventory

For a medium-sized business, hiring a CFO is an immeasurable asset. While they can help with the more routine tasks like budgeting, cash flow management, and reporting, CFOs can also help with strategic goal setting.

Traditional business models suggest hiring an in-house CFO to help with this role. However, your medium-sized business can benefit from hiring an outsourced CFO to take on these responsibilities without impacting your bottom line.

Hiring an outsourced CFO is an effective way to reduce payroll costs, boost productivity, and efficiently achieve business goals and metrics.

In addition to routine financial management, an outsourced CFO can create financial forecasts and robust reporting to help you set and achieve your financial goals faster. They can also help with mergers and acquisitions, capital raising, financial modeling, and investor relations.

As your business reaches new financial heights, it’s important you carefully monitor for any risks. Hiring an outsourced CFO can help your medium-sized company with risk management and regulatory and tax compliance.

Read more about the importance of financial risk management here.

Hiring a CFO for a Large Business

top view of a large industrial distribution warehouse with their working employee

Hiring an outsourced CFO for a large business is crucial. While most large businesses have a full-time CFO, it may be wise to consider switching to outsourced CFO services.

There are numerous benefits to outsourcing your company’s CFO role, including increased financial focus, the ability to reach financial goals faster, and a critical eye to financial bottlenecks and operational risks that may be overlooked.

While an in-house CFO may be a financial expert, they may not know their way around a tax audit. That’s why we recommend hiring an outsourced CFO who can work cross-functionally to provide you with financial expertise while managing your tax obligations.

Need more reasons to hire an outsourced CFO for your business? Check out five ways an outsourced CFO can save your business money.

At Cook CPA Group, we have decades of experience helping businesses of every size manage their finances and prepare business taxes to maximize savings. Hiring a CFO becomes an essential step in growing your business, no matter the size of your company.

Schedule a free consultation with us today to find out how to hire Cook CPA Group as your company’s outsourced CFO.

How to Make Tax-Free Gifts in 2023

rolled one hundred dollar bills tied with red ribbon

rolled one hundred dollar bills tied with red ribbon

The IRS allows individuals to make tax-free gifts to certain recipients under specific circumstances. While you may not believe you are in the financial position to give tax-free gifts in 2022, what you learn may surprise you.

This post guides you on the IRS rules regarding making tax-free gifts and tips to take advantage of this tax benefit to save money on your taxes in 2022.

Annual Exclusion Tax-Free Gift

The IRS allows an annual exclusion that permits individuals to make gifts up to a certain amount to as many individuals as they want, without incurring any gift tax.

For 2022, the annual exclusion is $16,000 per recipient. This means you can give $16,000 to each of your children, grandchildren, friends, or any other individual without paying any gift tax. You can also make joint gifts with your spouse, allowing you to give up to $32,000 per recipient per year without incurring a gift tax.

Tuition and Medical Expenses Gift Exclusion

You can pay tuition or medical expenses for someone else directly to the educational institution or medical provider without incurring gift tax. While this is an incredible opportunity to save money, you should ensure that the payment is made directly to the institution or provider for the benefit of a specific individual.

You cannot gift the money to an individual with the sole purpose of using the money to pay for education or medical expenses. The money must go directly to the educational institution (like a college or university) or a medical provider.

Gifts to a Spouse Tax Exclusion

husband surprise his wife with gift of a new car

Gifts to your spouse are generally tax-free, regardless of the amount. However, if your spouse is not a United States citizen, the annual exclusion for gifts for your spouse is $164,000 in 2022.

This is certainly something to keep in mind around the holidays when expensive gifts are often purchased.

Gifts to Political Organizations Tax Exclusions

If you are involved in local, state, or federal politics, rest assured there is a tax-saving opportunity for you! The IRS allows you to make tax-free gifts to political organizations for use in political campaigns.

Like all gifts, ensure you retain all receipts in case of an audit.

Charitable Gifts Tax Exclusion

You may already be familiar with the charitable gift tax exclusion, as many people take advantage of this tax-saving tip. If this is the first time you’ve heard about charitable gift-giving, you should know that to get the gift-tax exclusion, you should make your gift to a qualified organization and ensure you obtain a receipt for the gift.

Gifts to a Trust Tax Exclusion

The IRS has specific tax allowances for trusts, including making tax-free gifts to a trust as long as certain requirements are met.

Among other things, to make tax-free gifts to a trust, the trust must be irrevocable, and you must not retain any control over the trust or the assets in the trust.

Gifts to Non-Profit Organizations Tax Exclusion

family donating gifts and toys to non profit organization

Similar to gifts made to charitable organizations, you are allowed to make tax-free gifts to a non-profit organization as long as the organization is registered as a 501(c)(3) organization by the IRS.

You can often determine the tax status of an organization by finding the information on its website or contacting them directly.

Gifts to a Tax-Exempt Organization Tax Exclusion

Like charitable and non-profit organizations, the IRS allows individuals to make tax-free gifts to a tax-exempt organization as long as the organization is recognized as tax-exempt by the IRS.

Common tax-exempt organizations include religious, scientific, and literary organizations.

Gifts to Governmental Agencies Tax Exclusion

While this gift-tax exemption may come as a surprise to some, the IRS allows you to make tax-free gifts to governmental agencies (including state or local governments) for public purposes.

Gifts to Reduce Estate Taxes

Finally, the IRS allows individuals to make tax-free gifts to reduce the value of their estate for tax purposes. The maximum amount you can gift without incurring any gift tax is the lifetime exemption amount.

For 2022, the lifetime exemption amount is $12.06 million for individuals and $24.12 million for couples.

It’s important to note that if you make gifts that exceed the annual exclusion amount or the lifetime exemption amount, you may have to pay gift tax. You may also have to file a gift tax return even if you do not owe any gif tax.

If you’re unsure if your gift qualifies for a gift tax exemption, reach out to Cook CPA Group today. We’ll help you consider the tax implications of gifts you make and answer any questions you may have.

7 Tax Tips for 2023 to Save Your Family Money

couple consulting financial advisor about tax tips

couple consulting financial advisor about tax tips

The new year is just around the corner, and it’s time to start thinking about taxes and saving your family money. Tax season can be overwhelming, but with the right strategy, it doesn’t have to be.

With a few smart moves, you can save your family money in 2022 and keep more of your hard-earned cash. At Cook CPA Group, we ensure our clients never pay more in tax than they have to. That’s why we’ve put together this post with seven tax tips you can leverage to save your family money this upcoming tax season.

Read on to learn the seven tax tips you must know to save money this year:

1. Take Advantage of Tax Credits

Tax credits are one of the best ways to save money on taxes. There are various tax credits available for families with children, low-income households, and new homeowner tax credits. It’s important to familiarize yourself with the different tax credits available and take advantage of those that apply to you.

For example, if you qualify for certain credits, such as the Earned Income Credit, you can reduce your tax bill significantly. Here are a few tax credits available for families to get you started:

2. Contribute to a Retirement Plan

Contributing to a retirement plan is a great way to save money on taxes. Most retirement plans have tax-deferred contributions, meaning you don’t have to pay taxes on the money you contribute until you start withdrawing it. This can help you save money in the long run.

Contributing to a 401k (if your employer provides such a benefit) or a traditional or Roth IRA can help lower your taxable income and reduce the amount of taxes you owe. While it may be daunting to open up a retirement account with all the options available to investors, you should know that the earlier you start contributing to a retirement plan, the more you’ll be able to save.

If you need additional guidance on contributing to your employer-sponsored 401k or setting up an IRA account for you or a member of your household, don’t hesitate to reach out to us. We can help inform you of the tax advantages of setting up these financial accounts.

3. Take Advantage of Deductions

calculator on one hundred dollar banknotes

Deductions are another great way to save money on your taxes this year. Deductions reduce your taxable income, which can help decrease the amount of taxes you owe. There are a variety of deductions available, including deductions for medical expenses, charitable donations, and business expenses.

It’s important to do your research and determine which deductions you may qualify for. Here are a few articles to help you get started on researching tax-saving deductions:

4. Set Up a 529 Plan

A 529 plan is a college savings plan that allows you to save money for your child’s college education on a tax-deferred basis. Contributions to a 529 plan are tax-deductible, and the money can be used for a variety of college expenses, including costly books and materials.

Setting up a 529 plan is a great way to save for your child’s future. If you have children in college or have a college-bound child, check out this article to learn more ways you can save money:

5. Make Charitable Donations

volunteer preparing donation to charity

Donating to a charity can help you save money on your taxes. Any donations you make to a qualified charity are tax-deductible, meaning you can deduct them from your taxable income.

You can use the money you save through your charitable donations to invest in other tax-saving strategies like retirement plan contributions or tax-deductible gifts to your children.

6. Invest in a Tax-Advantaged Savings Account

Tax-advantaged savings accounts can help you save money on your taxes. These accounts, including Roth IRAs and Health Savings Accounts (HSAs), allow you to save money while earning interest. The money you contribute to these accounts is not taxed, meaning you can save more money for your family over time.

To learn more about setting up an HSA or Roth IRA, contact us today. We will explain the differences between these tax-advantaged savings accounts to help you decide which plan makes the most sense for your current and future financial goals.

7. File Your Taxes Early

Filing your taxes early can help you save money on your taxes. And no, we aren’t just saying that because we’re expert tax professionals! By filing your taxes early, you ensure you receive any potential refund sooner while avoiding any late filing penalties.

Every penny counts when your goal is to save money during tax time. The tax professionals at Cook CPA Group are committed to ensuring you never pay more taxes than you have to.

Filing your taxes with the right accounting firm means you are always financially prepared. Planning your tax filing ahead of the deadline guarantees you won’t be surprised by any last-minute filings.

Schedule a free consultation with the tax experts at Cook CPA Group to maximize your family’s tax savings.

Frequently Asked Questions About Filing Business Taxes For the First Time

business owner filing their first business tax

business owner filing their first business tax

Starting a business is an exciting time in any entrepreneur’s life. However, the elation you may feel in seeing your vision come to life can quickly dissipate once tax season comes around. Filing business taxes for the first time can be a daunting experience.

In my over 20 years of experience as a professional accountant, I have found that business owners ask the same accounting and tax questions when first getting started. In an effort to help our clients, my team has put together this guide answering the most frequently asked questions about filing business taxes for the first time, including:

  1. How much does my business have to make before I’m required to pay taxes?
  2. How much should I put away to pay my business taxes?
  3. Will my business get a tax refund?
  4. Do I have to file taxes for my business if it made no money this year?

How much does a business have to make before paying taxes?

This is one of the first questions new business owners have about filing business taxes for the first time. Fortunately, the answer is straightforward. According to IRS tax laws, you must pay the Self-Employment tax (SE tax) if you work for yourself. This tax funds social security and Medicare, providing you with retirement, disability, and hospital insurance benefits.

If you own your own business, you are required to pay the SE tax if one of the following applies:

  1. Your net earnings from the business were $400 or more.
  2. You work for a church or a qualified church-controlled organization that elects to be exempt from social security and Medicare taxes. In this case, you must pay SE tax if you receive $108.28 or more in wages.

If either of the above points applies to you, you should also confirm you do not fall under any special rule or exception. Generally, the IRS allows exemptions to this rule for public officials like notary public fees, state and local government employees, etc.

For more information on the Self-Employment Tax, visit the IRS website here.

How much should a business put away for taxes?

magnifying glass one hundred dollar bills and percentage sign

How much you pay in tax in your first year in business (and every year after) depends on your business entity type and where you live. If you live in any of the following states, you don’t have to worry about saving money to pay state income tax:

  • Alaska
  • Florida
  • Indiana
  • Montana
  • Nevada
  • New Hampshire
  • South Dakota
  • Wyoming

On the other hand, if you live in a state with a high-income tax rate, like California or New York, you want to consider putting away a few extra dollars to pay your state income tax.

Another consideration is your business entity structure. If you structured your business as an LLC, S corp, or sole proprietorship, expect to pay the same tax rate as your own personal income tax rate. If you have a C corporation, you will pay a flat rate of 21% in taxes.

To account for the differences in business structure and state-based income tax variations, we recommend saving around 30% of your business income after expenses and deductions. That should be plenty of savings to pay both federal taxes and any applicable state taxes.

Do I have to file taxes during my first year in business?

The short answer to this question is yes. If your business made more than $400 in income this year, you are required to pay taxes your first year in business. The main thing to consider when filing taxes in your first year in business is the business tax payment deadlines.

If you expect to owe more than $1,000 or more in tax, and you operate your business as a sole proprietor, partner, or S corporation shareholder, expect to make quarterly estimated payments rather than the annual payments made as a personal filer. If your business is a C corporation and you anticipate owing tax of $500 or more, you must also make quarterly estimated tax payments.

Check out the IRS guide on Estimated Taxes to learn more about their requirements.

Do businesses get a tax refund?

judge gavel calculator and gold scale on dark background

Many business owners wonder if they can expect to see a tax refund in their mailbox after filing their taxes. While not as common for businesses as for personal tax filers, your small business can receive a tax refund in a few cases.

Since most business tax entities are considered pass-through, the business owner pays their federal income taxes on their individual tax return. So, if you own an LLC, sole proprietorship, or S corp, and your tax payments exceed the tax due, you can expect a tax refund just as you would with a personal tax return.

A benefit of structuring your business as a C corporation is the expectation of receiving a business tax refund. Because C corporations pay income taxes directly as a business (instead of passing through to the owner(s) personal return), they are the only entities that receive a refund to the business itself. Corporations can expect to receive a tax return only if it has paid more in estimated taxes than the tax it owes.

Do I have to file taxes if my business made no money this year?

There are several instances where a business has formed under a business entity (LLC, sole proprietorship, S corp, or C corp) but has not generated any income for the year. Whether you set up your business entity before formally opening or have ceased business operations for the year, you may still be required to file taxes even if you made no money.

Here are the specific rules for each business entity structure:

  • Single-Member LLC – there is no need to file taxes if you have no income or qualifying expenses.
  • Multi-Member LLC (partnership) – there is no need to file taxes if you have no income or qualifying expenses.
  • Sole Proprietorship – there is no need to file taxes if you have no income or qualifying expenses.
  • C Corporation – you must file an income tax return on annual taxable income unless you are exempt under section 501.
  • S Corporation – you must file an income tax return on annual taxable income unless you are exempt under Section 501.

Still, have questions about filing taxes in your first year in business? Schedule a free consultation today to speak with an expert team member. Cook CPA Group offers an array of tax preparation and planning services to help you through the business tax filing process.

6 Medical Expenses You Didn’t Know Were Deductible

stethoscope calculator and pen on medical expense report

stethoscope calculator and pen on medical expense report

With the cost of US healthcare sharply rising, you may wonder if you can deduct medical expenses to save money on your taxes this year. The short answer is yes. The IRS allows taxpayers to deduct qualified medical and dental expenses exceeding 7.5% of a taxpayer’s annual adjusted gross income (AGI).

While you may be familiar with some common qualified medical expenses like doctor’s visits, diagnostic tests, and hospital visits, there are many other deductions you should know. The following list outlines six lesser-known medical expenses you can deduct from your taxes this year.

Deductible Medical Expenses

1. Alternative Medical Expenses

Alternative medical practices are quickly becoming a helpful source of medical intervention. From naturopathic doctor visits, chiropractic care, and acupuncture appointments to Christian Science practices, there is a robust list of deductible alternative medical expenses.

Although this is a great tax-saving opportunity, be careful about writing off non-prescription supplements or treatments. These are non-eligible expenses that are expressly forbidden to be deducted from your tax bill. Read this IRS guide for a full list of eligible and non-eligible alternative medical expenses.

2. Infant Care Expenses

family managing budget for their children hospital expenses

It’s no secret that preparing for a baby’s arrival is costly. Luckily, there are several infant-related care expenses you can deduct to save money for other childcare expenses in the future. If you or your spouse has decided to breastfeed, any breast pumps or other lactation aides are deductible medical expenses. This includes the pump, accessories, nursing pads, topical creams and ointments, and breastmilk storage bags.

Alternatively, if your doctor has prescribed prescription-grade infant formula for your baby, you can also deduct those expenses from your taxes. While over-the-counter baby formula is not considered tax-deductible, it may be worth speaking to your provider about prescription formulas that may fit your baby’s needs while reducing your overall tax bill.

3. Disability Accommodations & Home Improvements

As we noted in a recent article about home improvement write-offs, some home improvements to accommodate disabilities or chronic illness are deductible medical expenses. If you, your spouse, or your dependent(s) require permanent home improvements to provide daily medical-related care, you can likely deduct such expenses from your tax bill.

The following are some examples of deductible medical-related improvements you should know:

  • Installing entrance and exit ramps for wheelchair accessibility or ease of mobility
  • Costs of widening hallways and interior and exterior doorways
  • Adding support bars and railings to extra stability and safety around your home and property
  • Modifying kitchen counters and cabinets

Read this helpful IRS publication here, for a full list of medical-related home accommodations and improvements.

4. Medical Conferences

It’s often said that you are your best advocate when it comes to your health and well-being. It’s natural for people to invest in learning about their medical conditions to better advocate for themselves in the doctor’s office. Fortunately, certain informational-related costs are tax deductible.

You can deduct several fees if you register for a medical conference that is directly related to a medical condition or chronic illness of you, your spouse, or your dependent(s). For example, registration fees and transportation costs are considered tax-deductible expenses. However, lodging and any meals for you and/or your family are not considered eligible medical deductions.

5. Smoking Cessation Programs

man in black t-shirt breaking cigarette

If you’re looking for other reasons to quit smoking, consider the tax-saving opportunities! If you decide to stop smoking through the help of a smoking cessation program, you can deduct any program costs and doctor-prescribed treatments from your tax filing this year.

Having said this, pay careful attention to expenses that are not eligible for deductions. For example, non-prescribed treatments like the popular nicotine patches or chewables are not eligible for deductions.

6. Reproductive Health Treatments

Reproductive health treatment expenses are eligible medical deductions that you may not have known to claim on your tax return. Any costs associated with birth control pills or procedures, including vasectomies, are deductible medical expenses.

Similarly, pregnancy-related costs and treatments, including pregnancy test kits, IVF treatment, other fertility treatments, lab fees associated with these treatments, and storage of eggs or sperm are tax deductible. Additionally, any legal abortion-related costs are also tax deductible.

How To Claim Medical Expense Deductions

gavel with medicine and syringe

Deducting medical expenses is not a difficult process, but it does involve careful planning. If you decide to deduct these or other medical and/or dental costs, you must ensure those costs exceed 7.5% of your AGI.

You can determine your adjusted gross income by adding your wages, capital gains, business income, retirement distributions, dividends, and other income and then subtracting any deductions. Common deductions for individual taxpayers include retirement contributions, health saving account contributions, education expenses, business expenses, and dependent-related expenses.

You can refer to the IRS 1040 Form instructions for more information on calculating your AGI.

The second thing to remember is that you cannot file a standard deduction if you want to deduct any medical-related expenses. Instead, you must file an itemized deduction using Schedule A Form 1040 or 1040-SR.

Additionally, if you’re self-employed, you may be eligible for the self-employed health insurance deduction for payments on insurance policies for you, your spouse, and any dependents.

To confirm whether your medical expenses are eligible for a deduction, reach out to us today. We will help you determine eligibility and ensure you file your deductions correctly.

5 Signs It’s Time to Hire an Outsourced CFO

business team talking to an outsource cfo

business team talking to an outsource cfo

As a business owner, finding time to get your finances in order while keeping up with the demands of daily operations quickly becomes impossible. Between maintaining your books to managing cash flow and expenses, there is just too much to keep up with. Because of this, you may be considering whether it’s time to hire a full-time CFO to manage your bookkeeping, accounting, and financial reporting.

While an in-house CFO makes sense for some large-scale enterprises, an outsourced CFO is often a much better fit for mid-sized businesses. This post outlines the five signs it’s time to hire an outsourced CFO rather than an in-house CFO for your business. Keep reading to see if any of the five signs resonate with you.

1. You Need a Clear Financial Picture

In business, cash flow is king. Understanding the differences in cash flow and revenue on a monthly basis can help you determine your next business move. You can’t expect to take risks or scale your business without knowing the total amount of money coming in each month.

If you find struggle to keep up with invoicing and expenses, it may be time to hire an outsourced CFO. An outsourced CFO can help you determine gaps between your cash flow and expenses, and ensure you stay financially solvent. Additionally, an outsourced CFO isn’t bogged down by daily operations, meaning they can provide clarity around your financial objectives.

2. You Need Help Maintaining Your Books

Along those same lines, it may be time to hire an outsourced CFO if you struggle to keep your financial books in order. Maintaining proper accounting practices and bookkeeping techniques is a significant pain for many business owners. Starting out, you may have felt confident doing your own bookkeeping and accounting, but over time, keeping up with the invoices and monthly expenses became overwhelming.

Finding an outsourced CFO who is also a certified public accountant (like our team at Cook CPA Group) can help you set up or better utilize accounting software. From there, an outsourced CFO can help maintain the accuracy of those books and prepare your quarterly tax filings.

3. You Need Regular and Custom Reporting

cfo having a regular and custom reporting

A benefit of having a CFO, whether in-house or outsourced, is the ability to get custom and regular financial reports. While many automated accounting software plans offer a reporting function, they’re often lacking in the customization department.

Having a financial pro provide you with detailed financial reporting can go a long way in scaling your business. Hiring an outsourced CFO means getting expert financial advice and detailed reporting to navigate difficult business decisions. Custom reports can include:

  • Balance sheet
  • Income statement
  • Cash flow statement

While your accounting software may provide these reports, the likelihood is that you’re not getting actionable advice on the appropriate steps your business should take. Hiring an outsourced CFO can help you analyze these reports and develop an implementation plan to keep you on the right track to pivot your business for growth.

4. You Don’t Have Time To Do It All Yourself

As a budding business owner, you may have had time to pore over your financial statements and cash flow spreadsheets. But as an established business, you may feel like you need to tack on an extra day or two each week to tackle all your tasks. If this sounds familiar, it’s time to hire an outsourced CFO.

Outsourced CFOs take your tedious financial tasks to give you the time you need to focus on daily operations. Imagine never thinking about bookkeeping or keeping up with cash flow issues again! Now that’s a benefit all business owners can agree on.

5. You Don’t Have the Budget to Hire a Full-Time CFO

One of the biggest signs it’s time to hire an outsourced CFO is if you don’t think you have the budget to hire someone in-house. The benefit of hiring an outsourced CFO is that many offer services at an hourly or set monthly price. Because they aren’t stuck dealing with employees or daily operations, outsourced CFOs focus on just the numbers. Say goodbye to paying for benefits, sick leave, and vacation time!

Hiring an outsourced CFO saves you money without skimping on the results. With curated and tailored reporting and expert advice, hiring an outsourced CFO is the best of both worlds: cost-effective and custom to your business.

Outsource Your CFO Function To Cook CPA Group

outsourced cfo presenting reports with her clients

If any of the above signs resonate with you, it’s time to hire an outsourced CFO. At Cook CPA Group, we have decades of experience helping businesses like yours increase cash flow, grow revenue streams, and set strategic financial goals.

When it comes to our outsourced CFO services, we leave no rock left unturned. We dig through the financial weeds of your business to identify gaps and opportunities to scale. Our founder, Evelyn Cook, is an expert accountant and finance professional with the strategic smarts to help your business be successful.

If you’re ready to hire an expert outsourced CFO, schedule a free consultation call with Evelyn. You’ll discover how Cook CPA Group will help you save on operational costs while making decisions that positively impact your business finances.