Author: Leon Clinton

Here’s important information regarding aircraft leasing and potential tax implications:

1. The IRS has announced increased audit scrutiny of private jet usage, mainly focusing on high-income taxpayers. You can bet this focus will trickle down to most aircraft.

2. There’s a risk that the IRS could classify your aircraft leasing as a hobby. That would tax you on the income but deny all deductions.

3. To protect yourself, consider the following strategies:

• Conduct your leasing activity in a businesslike manner with proper documentation.
• Consult with aircraft leasing experts.
• Structure your leasing activity as a single-member LLC within your existing business.

4. By having your business own an LLC that holds the aircraft and leases it back to the business, you can maintain liability protection while potentially avoiding hobby loss rule challenges.

If you want to discuss your aircraft, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• August 22, 2024

Here are some important updates and strategies regarding Social Security and Medicare taxes that may significantly impact your business.

For 2024, the Social Security tax ceiling increased to $168,600, resulting in a maximum Social Security tax of $20,906 for high-earners. The Social Security Administration projects this ceiling to rise annually, reaching $242,700 or more by 2033. Additionally, the government adds a 2.9 percent Medicare tax to all wages and self-employment income, with an extra 0.9% for high-income earners.

If you’re self-employed, these taxes can be particularly burdensome. Here are three strategies that can potentially reduce your tax liability:

1. Operate as an S corporation. This structure allows the corporation to pay you a reasonable salary and distribute the remaining profits to you, exempt from self-employment taxes.
2. Leverage community property rules. Married filers living in community property states can use IRS rules to eliminate or create a spouse partnership in order to reduce self-employment taxes.
3. Avoid the husband-wife partnership classification. With close attention to partnership attributes, you can avoid the husband-wife partnership classification and reduce overall self-employment taxes.

Each of these strategies has specific requirements and potential trade-offs. If you want to discuss the possibilities, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• August 19, 2024

Long-term care costs can be substantial, and neither Medicare nor Medicaid provide comprehensive coverage for most people. Long-term care insurance can help protect your finances, and there may be ways to deduct the premiums, depending on your business structure.

Here are four key points to consider:

1. C corporations can provide long-term care insurance as a fully deductible, tax-free benefit to owners.
2. Sole proprietors or single-member LLCs with a spouse as the only employee may be able to deduct 100 percent of the premiums through a Section 105-HRA plan.
3. S corporation owners, partners, and other sole proprietors may be able to deduct premiums subject to age-based limits.
4. If you don’t qualify for business-related deductions, you might deduct premiums as itemized deductions subject to age-based limits and the 7.5 percent floor.

If you want to discuss long-term care insurance deductions, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• August 15, 2024