Widget Tax, P.A.

Don't forget what the hustle is all about!! It's to enjoy your life! And for the next two weeks there will be no appointments on my calendar! ♥️

Gearing up for tax planning season that starts November 3rd and continues through the end of the year!

This is actually my favorite time of the year because I absolutely love tax planning and strategizing with my clients! It's the reason I got my master's degree in taxation!

PLEASE GET ON MY CALENDAR FOR TAX PLANNING ASAP BECAUSE THERE IS LIMITED SPACE ON MY CALENDAR DUE TO THE HOLIDAYS AND VACATIONS, AND I SELL OUT OF TAX PLANNING TIME EVERY SINGLE YEAR.

Celebrating the end of 2024 tax season with an incredibly amazing bourbon!

THANK YOU TO ALL OUR WONDERFUL CLIENTS WHO MAKE OUR SUCCESS POSSIBLE!! ♥️♥️

We are 100% committed to our mission.

HAPPY OCTOBER 15TH!! 2024 tax season ends today!

Are you aware that the final extended tax deadline is Wednesday? Hopefully you're already filled!!!

Yes, Widget Tax, P.A. has a few procrastinator clients that have come in the door recently. And no, we are NOT working overtime on the weekends, killing ourselves, so these clients can avoid late filing penalties.

I've been serving clients for over 35 years, and for many of those years I worked for larger firms where the partners forced the staff to bend over backwards for the clients that couldn't get their s**t together until the last minute. However, years ago, we adopted the following policy because our sanity and our lifestyle is important to us.

"A lack of planning on your part does not constitute an emergency on our part".

Consistently, we have begged our clients multiple times each year to get their stuff in early, but, every single year, many do not heed that advice.

Perhaps a year of paying penalties will drive the lesson home? Likely not, but the years of über stressful, client induced, deadlines are over for us.

Every year...there are procrastinators! LOL!

DEBUNKING THE "AUGUSTA RULE"

I cannot tell you how many clients have seen this rule mentioned on TikTok or from some YouTuber who thinks they are really clever at discovering this "amazing loophole".

While "14 days of tax-free rent" sounds freaking amazing on it's face, it's really not as good as most people think.

I will first give you two relevant IRS code sections and then I'll debunk this myth that has everyone all atwitter!!

IRS Code §280A(g) - The Augusta Rule is a tax provision that allows homeowners to rent out their homes for up to 14 days in a calendar year and not report the rental income.

IRS Code §162(a) - There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.

Here's a brief history of the Augusta Rule:

The rule gets its nickname from homeowners in Augusta, Georgia, who would rent out their homes during the annual Masters golf tournament. As the Masters gained prestige, more and more residents capitalized on the demand by renting their properties for short periods, often for significant amounts.

These homeowners were subject to tax obligations on their rental income. Feeling that this was unfair for casual, short-term rentals, local lawmakers and residents lobbied Congress for a tax exemption.

In response to these efforts, Congress enacted Section 280A as part of the Tax Reform Act of 1976. This section included subsection (g), which specifically created the 14-day exclusion, allowing homeowners to exclude rental income from their taxable income if the dwelling was rented for less than 15 days in a year.

So, then, as TikToker's indicate, and as my clients ask me, "So, I should be able to rent my home to my corporation for my monthly shareholder meeting (my wife and I) for $10,000 for the year!! My corporation deducts it and I don't report the income! Yes! I want you do this for me every year!!"

The answer is "Absolutely NOT". This doesn't work like this for several reasons which I will explain below.

First thing is the reference up above to IRC §162 which is how ALL businesses take business deductions. Go read it again and pay attention to two VERY intentional and VERY important words; Ordinary and Necessary.

To take ANY deduction in your business, the deduction has to be both Ordinary AND Necessary. For example...driving for business is both Ordinary AND Necessary, which is why it's allowed as a deduction. But, is owning a Ferrari for business deductible? Hopefully this extreme illustration shows you that, for most businesses, owning a Ferrari is neither Ordinary NOR is it Necessary. With me so far?

So, bringing that concept into the current topic, it can easily seen that in a husband and wife Corporation, it is NOT NECESSARY to rent their own home for a monthly corporate meeting. Thus, it fails §162 and we don't even need to discuss if it's Ordinary.

Now...if you were a corporation with a REAL Board of Directors of outside, unrelated parties, the analysis would likely be different...but that is not what most of my clients have.

But...let's pretend, for a second, that we COULD justify it under §162 so I can illustrate the second reason the question above fails.
You can't just willy-nilly pick a rental figure out of your ass and deduct it. I am sure you've heard of FMV or Fair Market Value, right?

So, if your house in your neighborhood would rent for $2,500, and you can easily look up the Rent Zestimate on Zillow for a rough guideline, then how can you justify $10,000 in rent for 14 days? YOU CAN'T. It would be more like $1,167 or so.

So...even if this strategy WOULD work for a husband/wife corporation or SMLLC, the amount of rent is so low that taking this risk on your taxes would only likely save you less than $300 in tax.

Not worth the risk, is it?

Have you ever noticed that the colors in the Widget Tax, P.A. logo match the red, white and blue of the American flag?

THAT IS NO ACCIDENT.

Today we are celebrating the 249th anniversary of the founding of our great nation and our amazing, very effective leader, President Donald J. Trump. ❤️🇺🇸

Our staff has been working hard killing payroll for the second quarter!

SO...WHAT'S IN THAT TAX BILL ANYWAY?

The Senate has passed the Big Beautiful Bill and it's on it's way to the House of Representatives!

And of course, your favorite CPA, Charles D Shapero, CPA, MST with Widget Tax, P.A. has the tax highlights for you.

HERE IS WHAT'S CHANGING (from a tax perspective only)

STANDARD DEDUDUCTION INCREASING
Single goes from $15K to $16K and MFJ goes from $30K to $32K

CAR LOAN INTEREST IS DEDUCTIBLE NOW? (2025-2028 only)
Up to $10K but ONLY on U.S.-built vehicles!

100% BONUS DEPRECIATION IS BACK! (2025-2029 only)

SALT CAP INCREASING (2025-2029 only)
Can you believe they took it from $10K to $40K Wow!
Phased out for income > $500K

CHILD TAX CREDIT INCREASING (2025-2028 only)
From $2,000 to $2,500

NO TAX ON TIPS!! (2025-2028 only)
Capped at $25K

NO TAX ON OVERTIME (2025-2028 only)
Capped at $12.5K

TRUMP'S 2017 TAX BRACKETS (LOWER) WERE MADE PERMANENT!
Top Tax Bracket remains only 37%!!

QBI NOT ONLY IS MADE PERMANENT, BUT IT'S BETTER??
Yup. QBI, which has saved my clients HUNDREDS OF THOUSANDS of dollars is now permanent
And the percentage goes from 20% to 23%!!

Now, don't get TOO excited. ALL of the above is NOT law until it passes the House and then is signed into law by President Donald J. Trump.

But at least we have given you some things to be happy about today!