Are you trying to sell investment or commercial real estate? If you use an installment sale to help sell real estate, you can benefit from tax deferral and possibly lower your overall tax bill. But watch out for a little-known tax trap.

Here's what to know

Generally, installment sale treatment is automatic for a sale where you receive payments in the tax year of the sale and at least one other tax year. For instance, if you sell real estate in 2017 and receive payments in both 2017 and 2018, you qualify. Part of the tax due on your gain is taxable in 2017 and part is taxable in 2018.

Note that real estate held longer than one year qualifies for favorable treatment of the capital gains tax. The maximum tax rate on long-term capital gains is only 20 percent, compared with the top ordinary income tax bracket of 39.6 percent.

Why an installment sale may be worthwhile

With an installment sale, you may benefit from the lower tax rate in several years by spreading out payments over time. This reduces your overall tax liability.

Caution: If you sell property to a related party that is then disposed of within two years, all the remaining tax comes due (barring certain exceptions). The tax law definition of "related parties" is more expansive than you might think. It includes:

• A spouse
• Children
• Grandchildren
• Siblings
• Parents
• A partnership or corporation in which you have a controlling interest
• An estate or trust you're connected to

Avoid any dire tax results by stipulating in the contract that the property can't be disposed of within two years.


Finally, be aware that installment sale treatment is only available for gains, not losses. Other special rules may apply, so give us a call and we can take a look at your specific your situation.
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"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain.Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Online Advisor Newsletters, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

​Under the tax reform plan recently announced by the Trump administration, most itemized deductions would be eliminated, except those for charitable donations and mortgage interest.

Because of this potential change, you may decide you want to accelerate certain deductible expenses you would have had in 2018 into 2017. Here are three key deductions to consider:

1. State and local income taxes. This is often a big-ticket item for residents of states with high tax rates. If payments are due on Jan. 1, 2018, pay them in December.
   
   Alternatively, you may elect to deduct state and local sales taxes. This deduction, which is often a better option for residents of low-tax states, can be claimed in one of two ways:
   
   • Deduct the actual sales tax paid during the year based on your records and receipts.
   
   • Use the IRS table. In addition to the table amount, you can deduct tax paid on certain big purchases like cars and boats.
   
   
2. Mortgage interest and property taxes. As with state and local income taxes, you may be able to increase your current deduction by prepaying mortgage interest and property taxes. (Note that the proposed tax reform plan would repeal property tax deductions, but not mortgage interest.)
   
   You may even consider using a home equity loan to consolidate debts if the interest would qualify as deductible mortgage interest. The loan is secured by your home, so use this technique sparingly.
   
   
3. Charitable donations. Although charitable donations aren't on the list of proposed tax reform cuts, you can bolster your deduction by making donations late in the year. Be aware that you must observe strict recordkeeping requirements for monetary gifts of $250 or more.
   
   Suppose you charge a donation on your credit card on Dec. 31. The gift is still deductible in 2017, even though you won't pay the charge until 2018.

Finally, remember that itemized deductions are reduced for high-income taxpayers. We can help you figure out what deductions are most beneficial for you.


"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain.Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Online Advisor Newsletters, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720
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