Retirement

Capital Gains Planning: How to Protect Wealth from Big Tax Hits

When it comes to selling a stake in your business or managing long-term investments, capital gains taxes can take a significant bite out of your profits. If you’re not careful, these taxes can erode the wealth you’ve worked so hard to build. Fortunately, with the right strategies, you can minimize your tax liability, keep more of your earnings, and reinvest in your financial future.

At Insogna CPA, one of the best CPA firms in Austin, we specialize in helping business owners navigate the complexities of capital gains taxes with confidence and clarity. Located in South Austin, we offer personalized accounting services tailored to your unique financial situation.

❓ What Are Capital Gains Taxes?

Capital gains are the profits earned when you sell an asset—such as real estate, stocks, or a stake in your business—for more than its purchase price. The tax rate you’ll pay on these gains depends on how long you’ve held the asset.

Short-Term Capital Gains: If you’ve owned the asset for less than a year, the profits are taxed as ordinary income, which can range from 10% to 37%.
Long-Term Capital Gains: Assets held for over a year qualify for lower tax rates, typically between 0% and 20%, based on your taxable income.

Additionally, high earners may face the Net Investment Income Tax (NIIT), an additional 3.8% on top of their capital gains tax.

Our team at Insogna CPA, a leading Austin TX accounting firm, can help you understand how these rates impact your specific financial situation and develop strategies to reduce your tax burden.

💡 Strategies to Minimize Capital Gains Taxes

Let’s explore the proven strategies business owners can use to keep more of their profits while staying compliant with tax laws.

1. Time the Sale of Assets Strategically

Timing is everything. Selling your assets at the right time can have a significant impact on your tax bill.

📌 Hold for Long-Term Gains: Always aim to hold assets for more than a year to qualify for the lower long-term capital gains tax rate.
📌 Income Smoothing: Consider selling during a year when your taxable income is lower, such as after retirement or in a year with fewer other sources of income.

Our Austin tax advisors can help you time your sales strategically to maximize your tax savings.

2. Use Installment Sales for Business Stakes

If you’re selling a significant portion of your business, an installment sale can spread out the tax burden over several years.

📌 How It Works: Instead of receiving the full payment upfront, you structure the sale to receive payments over time.
📌 The Benefit: This allows you to report the gains incrementally, keeping you in a lower tax bracket each year.

We offer specialized expertise in this area as part of our accounting services in Austin for business owners.

3. Leverage Qualified Opportunity Zones

Opportunity Zones offer a unique way to defer and reduce capital gains taxes while supporting community development.

📌 Tax Deferral: By reinvesting your gains in a Qualified Opportunity Fund, you can defer taxes on the original gain until 2026 or until the new investment is sold.
📌 Tax-Free Growth: If the new investment is held for at least 10 years, any additional gains on that investment are entirely tax-free.

As one of the top CPA firms in Austin Texas, we can guide you through the Opportunity Zone process and its potential benefits.

4. Gifting Appreciated Assets

If you’re planning to share your wealth with family or give to charity, gifting appreciated assets can be a smart tax strategy.

📌 Family Gifting: Transferring assets to family members in lower tax brackets can reduce the overall tax liability.
📌 Charitable Contributions: Donating appreciated assets to a qualified charity eliminates capital gains taxes on the gifted portion and provides a tax deduction for the asset’s full market value.

Looking for a CPA in Austin Texas to help implement these strategies? Insogna CPA offers tailored solutions for small businesses and high-net-worth individuals.

5. Offset Gains with Tax-Loss Harvesting

You can reduce your taxable gains by selling underperforming assets to realize losses.

📌 How It Works: Capital losses can offset your capital gains dollar-for-dollar. If your losses exceed your gains, you can use up to $3,000 annually to offset ordinary income.
📌 Future Savings: Any unused losses can be carried forward to reduce taxable gains in future years.

Special Considerations for Business Owners

Section 1202 Qualified Small Business Stock (QSBS) Exclusion

If you’ve invested in a C Corporation that qualifies as a small business, you may be eligible to exclude up to 100% of the gains from your federal taxes.

Eligibility: The stock must be held for at least five years, and the corporation must meet specific criteria outlined under Section 1202.
The Impact: For qualifying stocks, you can exclude up to $10 million or 10 times your basis in the stock, whichever is greater.

Our Austin small business accountants can help you determine if your stock qualifies for this exclusion and guide you through the process.

S Corporation Tax Planning

As an S Corporation owner, you have unique opportunities to manage capital gains:

Basis Management: Maximize the use of your stock basis to minimize taxable gains when selling your stake.
Installment Sales: Spread gains over multiple years to reduce the immediate tax impact and manage cash flow effectively.

Partnering with Insogna CPA

Capital gains planning is complex, but with Insogna CPA—a trusted Austin accounting firm—you can make informed decisions that protect your wealth and minimize tax liabilities. Our team offers comprehensive accounting services to business owners across Texas, from small businesses to high-net-worth individuals.

Whether you need help with tax-loss harvesting, gifting strategies, or Opportunity Zone investments, our Austin TX accountants have the expertise to guide you every step of the way.

Ready to safeguard your wealth from big tax hits? Contact Insogna CPA today to schedule a consultation with one of the best CPAs in Austin!

Paying for Assisted Living & Home Care for Senior Citizens in Texas

Did you know that nearly 12% of Texans are over the age of 65? With longer lifespans comes a reality many of us will face—caring for aging loved ones. While it’s a privilege to help, the costs of care can add up quickly, and understanding your options is crucial. Whether it’s in-home help or full-time nursing care, Texas offers resources, but knowing where to turn can make all the difference.

🏡 In-home Care

Sometimes, an elderly family member may only need help with grocery shopping, meal preparation, or light housekeeping. If cooking has become a challenge, the Texas chapter of Meals on Wheels provides meals to seniors at little or no cost.

If you’re comfortable with someone visiting your loved one in their home, there are many in-home care services available—both through agencies and individuals. National services like Care.com and Visiting Angels offer resources, and there are also local options. Costs vary depending on the level of care, with payment typically by the hour or a flat day rate. Local and state agencies may offer some financial support—details are available on the Texas Health and Human Services website. If your loved one owns their home but is low on cash, a reverse mortgage could free up funds while allowing them to stay in their home.

🩺 Assisted Living and Nursing Home Care

If an elderly family member needs help with cooking, shopping, or getting to appointments, those needs can usually be handled with services like ride-shares or grocery delivery. However, when medical issues like Alzheimer’s, dementia, or physical disabilities arise, more intensive care may be required. If a live-in caregiver isn’t an option, it might be time to consider assisted living or nursing home care.

For seniors who are still mobile and cognitively strong, assisted living can be a good solution. These facilities provide meals, activities, and social interaction, all in one place. But be prepared—costs in Texas range from $4,000 to $10,000 a month depending on the amenities and level of care needed.

For those requiring nursing home care, the costs are often higher, and assets like a home could be used to cover these expenses. Entry fees or deposits of several thousand dollars are common, and while room and board are included, extras like cable or salon services may cost extra. If your loved one’s assets are depleted, it’s worth exploring Medicaid options, though availability can be limited and the paperwork time-consuming.

Need Help?

Caring for an aging loved one can be overwhelming—emotionally and financially. But you don’t have to figure it all out on your own. We’re here to help you navigate the financial side of senior care, from understanding care costs to making the most of available resources. Give us a call today, and let’s plan together for the care your family deserves, with less stress and more peace of mind.

Tax-Deferred: What Does It Mean And How Does It Benefit You

When you’re planning for your child’s future education or your own retirement, there are several smart ways to save. You might dive into the stock market, invest in income-generating real estate, or stash money in education savings accounts or retirement plans.

Understanding how these different savings vehicles are taxed is critical to making the best choice for your financial situation. Let’s start with a look at the tax treatment of IRA accounts.

💡 IRA, Roth IRA, and other Retirement Plans

Individual Retirement Account (IRA)
There are two main types of IRAs: the Traditional IRA and the Roth IRA. Despite their similar names, their tax treatments are worlds apart.

Traditional IRA – Contributions to a traditional IRA are usually tax-deductible unless you have a retirement plan at work. In that case, higher-income earners may lose the deduction. Earnings within a traditional IRA are tax-deferred—meaning you won’t pay taxes now, but you will when you take money out. If you didn’t take a deduction for contributions (whether by choice or due to restrictions), withdrawals will be partly taxable and partly tax-free.

Roth IRA – Roth IRA contributions are never tax-deductible, but the real magic happens when you withdraw. If you’ve had the account for at least five years and you’re over 59.5 years old, both contributions and earnings come out tax-free.

So, which one is best for you? It depends. If you need that tax break now, a traditional IRA may be the way to go. But if you’re fine without the immediate deduction, the Roth IRA’s tax-free withdrawals are a serious long-term win.

Retirement Plans
Whether you’re an employee or self-employed, the tax code offers a buffet of retirement plans to help you save. From 401(k)s to SEP IRAs, these plans generally allow you to defer taxes on contributions until you withdraw the funds in retirement. However, if you opt for the Roth version of a 401(k) or 457 plan, your contributions aren’t tax-deferred, but your withdrawals will be tax-free in retirement.

💡 Savings, Gains, and Withdrawals

Bank Savings
Simple but effective, money tucked into a bank savings account or CD earns interest that’s taxable in the year it’s earned. The good news? Once you’ve paid the tax, the full amount is yours to use, no strings attached.

Capital Gains
Whether from stocks, bonds, or real estate, capital gains are a big part of tax-deferred investing. Long-term capital gains, which come from assets held for over a year, are taxed at a lower rate than short-term gains. For most people, that rate is 15%, significantly lower than ordinary income tax rates.

Education Savings Accounts
Planning for college? The Coverdell Education Savings Account and the 529 Plan are your go-to tax-advantaged savings tools. While contributions aren’t tax-deductible, both plans’ earnings grow tax-deferred and are tax-free if used for qualified expenses like tuition. Start early to maximize the benefit!

Health Savings Accounts (HSA)
HSAs are a powerhouse of tax advantages if you have a high-deductible health plan. Contributions are tax-deductible, earnings grow tax-free, and withdrawals used for qualified medical expenses are also tax-free. After age 65, you can even use the funds for non-medical expenses—though you’ll pay taxes on those withdrawals.

Unqualified Withdrawals
Beware of dipping into retirement or savings accounts for non-qualified reasons. Early withdrawals can trigger hefty taxes and penalties. It’s always best to consult a tax professional before making any moves.

Navigating the world of tax-deferred investing?

Our team of experts can help you find the best strategies for your specific situation in 2024 and beyond. Let’s talk about how you can grow your savings while minimizing your tax bill—schedule a consultation with us today!

How to Leverage Roth 401(k) and Roth IRA Plans for Retirement Success

Contributing to a Roth 401(k) or Roth IRA is a smart move for your retirement game plan. These accounts let you save while enjoying significant, long-term tax perks. But before diving in, it’s worth weighing the pros and cons to figure out what best aligns with your financial goals.

The key difference between a Roth and a traditional retirement plan boils down to when you pay taxes. With a traditional 401(k)/IRA, you contribute pre-tax dollars now and settle the tax bill later, during retirement. Roth plans flip the script: you contribute with after-tax dollars today, meaning those withdrawals in retirement come tax-free. It’s all about deciding when you’d rather deal with Uncle Sam.

❓ Roth Plans vs. Taxable Accounts: Why Go Roth?

Choosing a Roth 401(k) or IRA over a standard taxable account can offer significant protection and perks. While you get the same investment options, Roth accounts come with some legal shields, especially when it comes to bankruptcy protection and lawsuits—something taxable accounts can’t guarantee.

Another bonus? No annual tax reporting. Unlike taxable accounts where you pay income taxes annually, a Roth allows your earnings to grow tax-free, and qualified withdrawals are tax-free too. Fewer tax headaches, more growth potential.

💡 Roth vs. Tax-Deferred Retirement Accounts: More Savings, Fewer Hassles

A Roth 401(k)/IRA offers better long-term tax savings than a tax-deferred retirement account. Since you pay taxes upfront, all future growth is tax-free—meaning you can enjoy more tax-free money in retirement. And with no required minimum distributions (RMDs), your money can keep growing as long as you want.

Plus, there’s no age limit for contributions as long as you have earned income. It’s a plan that grows with you, literally.

✍️ Estate Planning with Roth Plans: Leave More for Your Heirs

From an estate planning perspective, Roth accounts offer a win-win. With tax-free distributions, there’s no income tax for beneficiaries on the money they inherit. Plus, Roth plans allow your heirs to take RMDs on their terms while leaving the rest to grow tax-free. And bypassing probate? That’s just icing on the cake.

🚶‍♂️‍➡️ The Backdoor Roth IRA: A Clever Workaround

If your income exceeds the IRS limit for Roth IRA contributions, a “backdoor” Roth IRA could be your secret weapon. It’s an IRS-approved method that allows high earners to enjoy the benefits of a Roth. You can roll over funds from a traditional IRA into a Roth IRA or convert the entire account. Keep in mind, you’ll still owe taxes on the transferred amount, but it can be worth it for the long-term tax savings.

In a nutshell, choosing a Roth 401(k) or Roth IRA is a solid investment in your financial future. It’s about playing the long game and reaping the rewards when you need them most.

Ready to Plan for Your Future?

At Insogna CPA, we’re pros when it comes to helping you navigate retirement planning. Whether you’re eyeing a Roth 401(k) or looking into that sneaky backdoor Roth IRA, our team of licensed CPAs is here to make it easy. Reach out today, and let’s build a strategy that sets you up for success. Your future self will thank you.

Can I Use My Roth IRA as an Emergency Fund?

Thinking about withdrawing your Roth IRA? Maybe it’s for a new home, unexpected expenses, or you’re just curious about accessing your retirement savings. The good news is, yes, you can withdraw money from your Roth IRA—but there are some important rules and timing to consider. Let’s break it down so you can understand when and how to make the most of your Roth IRA without getting hit with penalties or taxes.

❓ Can I Withdraw or Use My Roth IRA as an Emergency Fund?

A: Yes, a qualified distribution that occurs at least 5 years after the year you made the ROTH contribution, you an take money out for either:

1️⃣ You’re over the age of 59 ½,
2️⃣ Distribution is related to your disability (defined in I.R.C. § 72)
3️⃣ Money is paid to a beneficiary or estate on or after your death, or
4️⃣ Taken for a qualified special purpose, including for a first-time homebuyer expense up to $10,000.

You can qualify as a first-time homebuyer even if you’ve owned a home in the past. As far as the Internal Revenue Service (IRS) is concerned, you’re a first-time homebuyer if, “you had no present interest in a main home during the 2-year period ending on the date of acquisition of the home which the distribution is being used to buy, build, or rebuild. If you are married, your spouse also must meet this no-ownership requirement.”

Ready to make smart moves with your retirement savings?

Before you make any Roth IRA withdrawals, let’s ensure you’re maximizing every tax benefit. Schedule a chat with us today, and we’ll guide you through your options. Your future self will thank you!

2024 Tax Tips for IRA Owners

There are plenty of opportunities—and a few pitfalls—for individual retirement account (IRA) owners. While you don’t want to fall into a tax trap, you should definitely take advantage of these IRA tax tips and smart strategies available for 2024.

Individual Retirement Account Varieties: Traditional and Roth IRAs come in two varieties: Traditional and Roth. The Traditional IRA generally provides a tax deduction for contributions, tax-deferred growth, and taxable distributions upon withdrawal. On the other hand, Roth IRAs don’t offer an immediate tax deduction, but your distributions in retirement are tax-free.

This leaves IRA owners with an important decision, one that has long-term consequences. If you can contribute without needing the tax deduction, a Roth IRA might be the better choice in many cases. However, be aware that high-income earners face restrictions on contributions to both types of IRAs.

💡 Potential Pitfalls with IRAs

Here are some common pitfalls that can trip up IRA owners:

📌 Early withdrawals – The government designed IRAs as retirement savings vehicles, so tapping into your account before age 59½ often comes with a 10% early withdrawal penalty on the taxable amount. However, there are certain exceptions to this penalty.
📌 Excess contributions – The tax code sets annual limits for IRA contributions. Exceeding those limits results in a 6% excise tax penalty on the excess amount, which continues until the over-contribution is corrected.
📌 Multiple rollovers – While you can take possession of IRA funds for up to 60 days during a rollover, only one rollover is allowed per 12-month period. Exceeding this results in the additional rollover being treated as a taxable distribution—and an excess contribution if it’s redeposited into another IRA.
📌 No Traditional IRA contributions after age 70½ – Once you hit age 70½, you’re no longer allowed to contribute to a Traditional IRA, though Roth IRAs don’t have this restriction.
📌 Failing to take a required minimum distribution (RMD) – Traditional IRA owners must begin taking RMDs at age 73 (previously 70½). If you fail to do so, you’ll face a steep penalty equal to 50% of the RMD amount. Roth IRAs are exempt from RMDs while the account owner is alive.
📌 Late contributions – You can still make IRA contributions for the prior year until the tax filing deadline (April 15). This is helpful if you’re unsure whether you could afford a contribution before the year ended.
📌 Backdoor Roth IRA – High-income earners may not be able to contribute directly to a Roth IRA, but there’s a workaround known as the backdoor Roth. This involves making a non-deductible contribution to a Traditional IRA and then converting it to a Roth IRA. Be cautious of the tax implications, as the IRS treats all IRAs as one when calculating conversion taxes.

💸Saver’s Credit

For low- to moderate-income taxpayers, the Saver’s Credit can help offset the first \$2,000 contributed to an IRA or other retirement accounts. This credit is available on top of any other tax benefits from contributing, but it has limited availability. Reach out to learn more about whether you qualify.

📩 IRA-to-Charity Direct Transfers

If you’re 70½ or older, you’re required to take RMDs from your IRA. You can take advantage of a special provision that allows direct transfers of up to $100,000 per year from your IRA to a qualified charity. This not only satisfies your RMD but can also lower your taxable income, helping you benefit even if you don’t itemize deductions.

Maximize Your IRA Tax Benefits

IRA owners face plenty of decisions and potential pitfalls, but with the right guidance, you can turn these to your advantage. Whether you’re planning for your RMDs, looking into a backdoor Roth IRA strategy, or simply trying to avoid common missteps, having a proactive approach to your IRA can save you a lot of tax headaches.

Ready to take control of your IRA tax strategy? Reach out today, and let’s plan your path to a secure retirement. We’re here to help you navigate the complexities with ease.