Category: Lower Your Tax Bill

Everyone hates the Alternative Minimum Tax or AMT. The AMT requires that you calculate your tax bill under a different set of rules and deductions, compare that number to your regular tax, and pay the larger of the two.  This decades-old measure was originally enacted to make sure the super-rich paid their fair share of taxes.  However, over the years it began to hit taxpayers of modest means.  As a result, the AMT has not been very popular in recent years and many have called for its repeal.

Last year, as tax reform was debated, Congress stopped short of doing away with the AMT but did succeed in taming the beast in a significant way. Two major changes were made as follows:

  1. The exemption amounts were raised from $ 84,500 to $ 109,400 for married taxpayers and from $ 54,300 to $ 70,300 for single filers.
  2. The phase-out range for these exemptions was increased significantly. Under prior law, you would start losing part of your exemption at income levels of $ 160,900 for marrieds and $120,700 for singles. Those numbers are now $ 1 million and $ 500,000, respectively. The result is that many more taxpayers get the benefit of the exemptions.

Because of these changes, the AMT is estimated to affect only about 200,000 tax filers in 2018 versus 5 million taxpayers who paid it under the old law. That’s a 96% drop!  This will bring welcome relief to the average taxpayers who were getting hit with this tax year after year.



David K. Raye, CPA, P.C.                     704-887-5298   


*The information in this blog post is general in nature and not intended as specific advice.  Please consult a tax advisor to see how this information applies to your specific situation. 

An investment vehicle that may be worth a second look in the wake of tax reform is Real Estate Investment Trusts or REITs. REITs are corporations that primarily invest in real estate and produce income from rental properties or from buying and selling properties.  They are usually sought out for their ability to produce an income stream since 90% of their income is paid out in the form of dividends.

The 20% deduction for pass-through income that was part of the recent tax law change will apply to holders of REITs. This means that investors in REITs will only pay tax on 80% of the dividends earned.  This automatically increases the return on investment for REITs making them an attractive investment.

The 20% deduction took effect January 1, 2018 and can be claimed on your personal tax return starting with the 2018 tax year. Taxpayers in the top income tax bracket of 37% will have an effective rate of 29.6% on their REIT dividends. Please see an investment advisor to find out what REITs may be right for you.



David K. Raye, CPA, P.C.                     704-887-5298   


*The information in this blog post is general in nature and not intended as specific advice.  Please consult a tax advisor to see how this information applies to your specific situation. 

Tax revenue losses from the various exclusions, exemptions, deductions and credits that exist in the tax code are generally defined by the federal government as tax expenditures. The following is a list of the 10 largest individual tax expenditures according to the Joint Committee on Taxation, a nonpartisan, congressional group.  The listing includes how each of these tax expenditures fared in the recent tax reform bill passed by Congress and signed into law in December.


  1. Tax favored retirement plans and accounts – This includes IRAs, 401ks and the like. These breaks were mostly untouched by tax reform.
  2. Exclusion for employer provided health insurance – still alive and well
  3. Reduced tax rates for qualified dividends and long term capital gains – these rates did not change.
  4. Tax free Social Security benefits – no change. Benefits are taxed by some taxpayers depending on their level of income.
  5. State and local income and property tax deductions – This break received the biggest hit but still survived although capped now at $ 10,000 annually.
  6. Mortgage interest deduction – Mostly survived but home equity interest deductibility has gone away.
  7. Charitable contributions – This deduction isn’t going anywhere!
  8. Earned income credit – unchanged
  9. Child tax credit – This credit was increased and made available to many more taxpayers.
  10. Health premium tax credit – This Obamacare provision is unchanged (for the moment).

Not surprisingly, 9 of the 10 were either unchanged or barely touched. Only one, the state and local tax deduction, was drastically cut.  All this is generally good news for taxpayers who will continue to see the benefits of these various tax breaks well into the future.


David K. Raye, CPA, P.C.                     704-887-5298   

*The information in this blog post is general in nature and not intended as specific advice.  Please consult a tax advisor to see how this information applies to your specific situation. 

Another method of donating to charity in a tax favored way is the donor-advised fund.  A donor-advised fund qualifies as a tax-exempt charity and therefore money can be placed in these accounts for an immediate income tax deduction.

These funds can grow tax free and then be directed to specific charities at a later date.

Donor-advised funds have been around since the 1930’s and have been established by community foundations and other non-profit organizations since that time.  Today these funds are growing in popularity and are now offered by financial institutions and all the major money management firms such as Vanguard, Fidelity and Charles Schwab to name a few.

Now for some caveats:  In exchange for the tax deduction, the donor loses control of these funds once the donor-advised fund is established.  In other words, the choice to contribute to these funds is irrevocable.  You or other co-advisors such as family members may still recommend grants (this is the “donor-advised” part).  The fund manager will generally comply with the owner’s advice but they are not legally obligated to do so.  Fees and costs are usually charged by the fund manager based on the amount of assets in the account.

In summary, donor-advised funds provide many benefits:

  • Immediate tax deduction
  • Tax-free growth
  • No annual payout requirements
  • No time restrictions for making donations
  • Simplicity of operation and professionally managed accounts

A donor-advised fund is an excellent vehicle for conducting your philanthropic goals while securing a tax deduction for yourself.  It is a lower cost and much simpler alternative to establishing a private foundation and an easy and flexible way to make charitable grants to the organizations that you want to support.


David K. Raye, CPA, P.C.



*The information in this blog post is general in nature and not intended as specific advice.  Please consult a tax advisor to see how this information applies to your specific situation. 

The charitable contribution deduction has been a mainstay of the tax code for decades.  The current Republican House tax plan preserves only two deductions – mortgage interest and charitable contributions.  When North Carolina’s tax system was overhauled a few years ago, only three deductions survived and charity was one of them.  This coveted tax break is so popular that it is almost sure to survive any Federal tax reform efforts.  The following are a few ways that you can make a difference in the world while lowering your tax bill.

Contributions by cash or check

This is the most common method of giving.  The important thing here is to keep documentation supporting your gift.  The charity must provide written acknowledgement for any single gifts of $250 or more.

Non-cash donations

This is another popular way to give and would include donations of clothing, furniture and other household items to organizations like Goodwill or The Salvation Army.  If the fair market value of goods exceeds $ 500, then an additional schedule is required with your tax return to list details of the contribution (date, description, etc.).

Donation of appreciated property

Donated stocks or real estate can be a tremendous tax saver.  If given directly to the charity, you can deduct the full fair market value of the property and avoid capital gains taxes on the appreciation.

Donation of automobiles

Many charities accept donations of motor vehicles.  For donations over $500, the deduction allowed depends on how the charity uses the vehicle.  If the charity sells the vehicle, the deduction is limited to the proceeds of sale.  This amount would be provided by the charity on Form 1098-C.  If the car is given to a needy individual or used by the charity, then the deduction allowed is the fair market value of the vehicle.  You cannot claim a deduction above $ 500 unless the charity provides the Form 1098-C.

Charitable mileage

Transportation for charitable activities can be deducted as a charitable contribution.  The deduction amount is either the actual expenses or a standard mileage rate of 14 cents per mile.

For more information about these and other tax saving moves, please contact my office at 704-887-5298 or email me directly.

*The information in this blog post is general in nature and not intended as specific advice.  Please consult a tax advisor to see how this information applies to your specific situation.

Image courtesy of Freepik

Thanksgiving is over, the Christmas season is in full swing and another year is rapidly coming to a close.  However, there are still actions that you can take now to lower your 2016 tax bill.  My standard advice for this year (and any year for that matter) is very simple:

Defer income until 2017 where that is possible and accelerate deductions into 2016.

This strategy takes on even more importance in the wake of November’s elections for two big reasons:

First, the prospects of lower tax rates are very high given the Republican majority in Congress and a Republican President who campaigned on that very issue.  There is likely to be legislation passed in 2017 that would lower tax rates across the board and it is not out of the realm of possibility that those cuts would take effect retroactively to January 1, 2017.  The potential for lower rates on January 1 makes the postponement of income until 2017 very attractive.

Second, tax reform may also bring major changes to tax deductions.  Both Trump’s plan and the GOP House plan call for a higher standard deduction ($ 30,000 and $ 24,000 respectively versus the current $ 12,600 for married filing jointly).  This would replace many of the itemized deductions that we have been accustomed to such as property taxes, mortgage interest, state income taxes and charitable contributions.  So 2016 could be the last year to take advantage of these deductions for some people.

Here are a few moves to consider between now and December 31:
  • Make that year end charitable donation to your favorite charity.
  • If you are making estimated tax payments, make the fourth quarter state payment by December 31.
  • Homeowners can make your January mortgage payment early and/or pay the property tax bill before year end.
  • If you’re thinking about dumping that losing stock, you could sell now in order to deduct the loss in 2016.
  • Business owners or those working on commission could delay billing customers until January, if feasible.  Also, businesses could consider making major equipment purchases in December.

Remember: deferring income and accelerating deductions is a good move that can lower your 2016 taxes no matter what happens with tax legislation.  We will be following Congress very closely in the New Year to see if and when this tax reform becomes a reality!


13850 Ballantyne Corporate Place, Ste. 500 Charlotte, NC 28277 Ph:(704) 887-5298


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