Investors weathered stock market turbulence, a crypto winter, and a downturn in the housing market last year, all of which could have significant tax implications.
For example, investors can take advantage of cryptocurrency losses, while those who invest in real estate can take full advantage of the past year. Key depreciation deductions. Also, some people who have been able to make profits in the stock market may find that they do not owe capital gains tax on their property if they meet certain income criteria. I can’t.
Here are three things investors should know this year as the US tax filing season begins.
How to Undo Crypto Losses
Investors can get tax breaks if they invest in crypto companies that have filed for Chapter 11 bankruptcy, such as Voyager, Celsius and BlockFi. Lisa Green-Lewis told CPA and Turbotax tax expert Yahoo Finance that if the bankruptcy situation were resolved by the courts and the currency lost all its value, taxpayers would not be worth the investment. He said it was because he could declare and receive a capital loss deduction.
“If bankruptcy proceedings were filed, they would have to wait and see what the outcome would be,” said Green-Lewis. [taxpayers] What you can do is collect the documents so that you can cover the costs. If deemed worthless, they can write it off. ”
Another potential crypto loss deduction is Form 4684 Ponzi scheme losses.
“If a cryptocurrency investment is determined to be a Ponzi scheme investment, itemizing the tax credit may allow the loss to be deducted as a loss,” Greene-Lewis wrote on the TurboTax blog. .
Still, none of the troubled cryptocurrency companies have been ruled as Ponzi schemes, despite multiple FTX users and one lawmaker likening the bankrupt cryptocurrency exchange to a Ponzi scheme. .
“They arrested Samuel Bankman-Fried, so he’s still not through court,” Larry Pong, a CPA and personal finance expert in Redwoods, Calif., told Yahoo Finance. “So I think we’ll learn more as we go through the courts.”
And if taxpayers receive Ponzi scheme deductions, Pong said:
Otherwise, investors can suffer losses in cryptocurrency just like capital gains and losses. More on that later.
100% bonus depreciation last year
Real estate investors, such as those who own rental properties, can claim a final 100% bonus depreciation on their 2022 tax returns before the regulation begins to be lifted in 2023. It is a benefit established by the Tax Cuts and Jobs Act (TCJA). allows the lessor or business to pre-deduct his 100% depreciation against qualifying property.
“Anything with a useful life of 20 years or less is subject to bonus depreciation,” Grant Dougherty, a registered agent and founder of Dougherty Tax Solution, told Yahoo Finance. “Basically, you can depreciate his 100% of the cost in his first year.”
Eligible assets include items such as appliances, kitchen countertops, and even outdoor pools.
Dougherty said:
However, according to the IRS, residential and commercial rental buildings use normal depreciation instead of bonuses because they have useful lives of 27.5 and 39 years.
Bonus depreciation will be phased out starting this year. 2023 eligible assets will get an 80% depreciation bonus. After that, the depreciation expense decreases by 20% each year until it is completely phased out.
capital gains and losses
A single investor earning up to $41,675 will not be able to pay long-term capital gains tax for the 2022 tax year, thanks to a new inflation-adjusted bracket announced by the IRS that raises the cap from $40,000 in 2021 was. The tax threshold has been raised to $83,350 per household from $80,800 last year.
For tax year 2023, the 0% long-term capital gains limit will further increase to $44,625 for single filers and $89,250 for married couples filing jointly.
A taxpayer who sells an investment that has been held for more than a year pays less tax on capital gains than on regular wages. These investments include stocks, real estate and cryptocurrencies. The tax rate is 0%, 15% or 20% depending on your income and filing status.
In addition to preferential rates for long-term capital gains, all investment gains may be offset by capital losses. Investors must first offset their losses against the same kind of gains, whether short-term or long-term, and then subtract against other kinds of gains.
“From a tax perspective, if you have a position with unrealized losses and perhaps want to dispose of that position, go ahead and lock it,” said Dougherty. “That capital loss can be used to offset any capital gains that may occur.”
If you have no offsetting capital gains, or your losses exceed your gains, you can use up to $3,000 in capital losses to deduct from your regular income such as wages, bonuses, rent, and interest income. Unused capital losses can be carried forward into the future.
Unlike the updated capital gains tax rate bracket, the $3,000 available for regular income is not adjusted for inflation. This deduction has remained the same for the past half century.
“It’s been indexed to inflation, so it’s been $3,000 for over 50 years, over 50 years,” Pong said. “Because Congress did not give the IRS the power to inflate its numbers when the law was written.”
Rebecca is a reporter at Yahoo Finance.
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