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December 30, 2020



Foreign Earned Income Exclusion – 2020 ‐ $107,600   

Gift Tax Annual Exclusion to non‐citizen spouse ‐ $157,000   

Foreign housing base amount (amount of foreign housing not deductible) ‐ $17,216   

Reportable gift threshold from foreign partnership or corporation for reporting on Form 3520

‐ $16,649   

Foreign housing expense (rent and utility) cap ‐ $32,280 unless you are in a high‐cost housing

location as defined by IRS. To see table of high cost housing locations and the relevant cap ‐  see

here (Section 3):

Regime for those who have ownership interests in non‐US corporations ‐ Global Intangible

Low‐Taxed Income (GILTI). These rules will cause or have caused many shareholders of non‐ U.S.

corporations to now be subject to tax even if they were not before. Service companies and similar

companies with very limited depreciable assets will most certainly be subject to GILTI and be

required to recognize the corporate earnings as income on the U.S. personal tax return. Please

contact us if you need planning or information on this taxation regime.

One must report overseas assets owned by businesses as well as individuals. So, the reporting

requirements are increasing and the penalties for failure to report continue to be harsh. Not all

foreign holdings must be reported. If, for example, you hold stock in a foreign company through a

U.S. broker, those holdings do not have to be separately reported. However, if you hold any other

types of foreign assets, including bank accounts and securities accounts, please let us know in

your questionnaire. If you have any doubt as to whether any of your assets are foreign, please

discuss those assets with us. Again, this year we will need information on a business’ foreign

holdings as well.


As year-end approaches it is a good time to think about planning moves that may help lower your

tax bill for this year and possibly next. Year-end planning for 2020 takes place during the COVID-19

pandemic, which in addition to its devastating health and mortality impact has widely affected

personal and business finances. New tax rules have been enacted to help mitigate the financial

impact of the disease, some of which should be considered as part of this years' planning, most

notably elimination of required retirement plan distributions, and liberalized charitable deduction


Major tax changes from recent years generally remain in place, including lower income tax rates,

larger standard deductions, limited itemized deductions, elimination of personal exemptions, an

increased child tax credit, and a lessened alternative minimum tax (AMT) for individuals; and a major

corporate tax rate reduction and elimination of the corporate AMT, limits on interest deductions,

and generous expensing and depreciation rules for businesses. And non-corporate taxpayers with

certain income from pass-through entities may still be entitled to a valuable deduction.

Despite the lack of major year-over-year tax changes, the time-tested approach of deferring income

and accelerating deductions to minimize taxes still works for many taxpayers, as does the bunching

of expenses into this year or next to avoid restrictions and maximize deductions.

We have compiled a list of actions based on current tax rules that may help you save tax dollars if

you act before year-end. Not all actions will apply in your situation, but you (or a family member)

will likely benefit from many of them. We can narrow down the specific actions that you can take

once we meet with you to tailor a particular plan. In the meantime, please review the following list

and contact us at your earliest convenience so that we can advise you on which tax-saving moves to


Year-End Tax Planning Moves for Individuals

... Higher-income earners must be wary of the 3.8% surtax on certain unearned income. The surtax is

3.8% of the lesser of: (1) net investment income (NII), or (2) the excess of modified adjusted gross

income (MAGI) over a threshold amount ($250,000 for joint filers or surviving spouses, $125,000 for

a married individual filing a separate return, and $200,000 in any other case). As year-end nears, a

taxpayer's approach to minimizing or eliminating the 3.8% surtax will depend on his estimated MAGI

and NII for the year. Some taxpayers should consider ways to minimize (e.g., through deferral)

additional NII for the balance of the year, others should try to see if they can reduce MAGI other

than NII, and other individuals will need to consider ways to minimize both NII and other types of

MAGI. An important exception is that NII does not include distributions from IRAs and most other

retirement plans.

... The 0.9% additional Medicare tax also may require higher-income earners to take year-end action.

It applies to individuals whose employment wages and self-employment income total more than a

threshold amount ($250,000 for joint filers, $125,000 for married couples filing separately, and

$200,000 in any other case). Employers must withhold the additional Medicare tax from wages in

excess of $200,000 regardless of filing status or other income. Self-employed persons must take it

into account in figuring estimated tax. There could be situations where an employee may need to

have more withheld toward the end of the year to cover the tax. For example, if an individual earns

$200,000 from one employer during the first half of the year and a like amount from another

employer during the balance of the year, he or she would owe the additional Medicare tax, but

there would be no withholding by either employer for the additional Medicare tax since wages from

each employer don't exceed $200,000.

... Long-term capital gain from sales of assets held for over one year is taxed at 0%, 15% or 20%,

depending on the taxpayer's taxable income. If you hold long-term appreciated-in-value assets,

consider selling enough of them to generate long-term capital gains that can be sheltered by the 0%

rate. The 0% rate generally applies to the excess of long-term capital gain over any short-term

capital loss to the extent that, when added to regular taxable income, it is not more than the

maximum zero rate amount (e.g., $80,000 for a married couple). If the 0% rate applies to long-term

capital gains you took earlier this year for example, you are a joint filer who made a profit of $5,000

on the sale of stock held for more than one year and your other taxable income for 2020 is $75,000

then try not to sell assets yielding a capital loss before year-end, because the first $5,000 of those

losses won't yield a benefit this year. (It will offset $5,000 of capital gain that is already tax-free.)

... Postpone income until 2021 and accelerate deductions into 2020 if doing so will enable you to

claim larger deductions, credits, and other tax breaks for 2020 that are phased out over varying

levels of adjusted gross income (AGI). These include deductible IRA contributions, child tax credits,

higher education tax credits, and deductions for student loan interest. Postponing income also is

desirable for taxpayers who anticipate being in a lower tax bracket next year due to changed

financial circumstances. Note, however, that in some cases, it may pay to actually accelerate income

into 2020. For example, that may be the case for a person who will have a more favorable filing

status this year than next (e.g., head of household versus individual filing status), or who expects to

be in a higher tax bracket next year.

... If you believe a Roth IRA is better than a traditional IRA, consider converting traditional-IRA

money invested in any beaten-down stocks (or mutual funds) into a Roth IRA in 2020 if eligible to do

so. Keep in mind, however, that such a conversion will increase your AGI for 2020, and possibly

reduce tax breaks geared to AGI (or modified AGI).

... It may be advantageous to try to arrange with your employer to defer, until early 2021, a bonus

that may be coming your way. This could cut as well as defer your tax.

... Many taxpayers won't be able to itemize because of the high basic standard deduction amounts

that apply for 2020 ($24,800 for joint filers, $12,400 for singles and for marrieds filing separately,

$18,650 for heads of household), and because many itemized deductions have been reduced or

abolished. Like last year, no more than $10,000 of state and local taxes may be deducted;

miscellaneous itemized deductions (e.g., tax preparation fees and unreimbursed employee

expenses) are not deductible; and personal casualty and theft losses are deductible only if they're

attributable to a federally declared disaster and only to the extent the $100-per-casualty and 10%-

of-AGI limits are met. You can still itemize medical expenses but only to the extent they exceed 7.5%

of your adjusted gross income, state and local taxes up to $10,000, your charitable contributions,

plus interest deductions on a restricted amount of qualifying residence debt, but payments of those

items won't save taxes if they don't cumulatively exceed the standard deduction for your filing

status. Two COVID-related changes for 2020 may be relevant here: (1) Individuals may claim a $300

above-the-line deduction for cash charitable contributions on top of their standard deduction; and

the percentage limit on charitable contributions has been raised from 60% of modified adjusted

gross income (MAGI) to 100%.

Some taxpayers may be able to work around these deduction restrictions by applying a bunching

strategy to pull or push discretionary medical expenses and charitable contributions into the year

where they will do some tax good. For example, a taxpayer who will be able to itemize deductions

this year but not next will benefit by making two years' worth of charitable contributions this year,

instead of spreading out donations over 2020 and 2021. The COVID-related increase for 2020 in the

income-based charitable deduction limit for cash contributions from 60% to 100% of MAGI assists in

this bunching strategy, especially for higher income individuals with the means and disposition to

make large charitable contributions.

... Consider using a credit card to pay deductible expenses before the end of the year. Doing so will

increase your 2020 deductions even if you don't pay your credit card bill until after the end of the


... If you expect to owe state and local income taxes when you file your return next year and you will

be itemizing in 2020, consider asking your employer to increase withholding of state and local taxes

(or pay estimated tax payments of state and local taxes) before year-end to pull the deduction of

those taxes into 2020. But remember that state and local tax deductions are limited to $10,000 per

year, so this strategy is not good to the extent it causes your 2020 state and local tax payments to

exceed $10,000.

... Required minimum distributions (RMDs) that usually must be taken from an IRA or 401(k) plan (or

other employer-sponsored retirement plan) have been waived for 2020. This includes RMDs that

would have been required by April 1 if you hit age 70½ during 2019 (and for non-5% company

owners over age 70½ who retired during 2019 after having deferred taking RMDs until April 1

following their year of retirement). So if you don't have a financial need to take a distribution in

2020, you don't have to. Note that because of a recent law change, plan participants who turn 70½

in 2020 or later needn't take required distributions for any year before the year in which they reach

age 72.

... If you are age 70½ or older by the end of 2020, have traditional IRAs, and especially if you are

unable to itemize your deductions, consider making 2020 charitable donations via qualified

charitable distributions from your IRAs. These distributions are made directly to charities from your

IRAs, and the amount of the contribution is neither included in your gross income nor deductible on

Schedule A, Form 1040. However, you are still entitled to claim the entire standard deduction.

(Previously, those who reached reach age 70½ during a year weren't permitted to make

contributions to a traditional IRA for that year or any later year. While that restriction no longer

applies, the qualified charitable distribution amount must be reduced by contributions to an IRA that

were deducted for any year in which the contributor was age 70½ or older, unless a previous

qualified charitable distribution exclusion was reduced by that post-age 70½ contribution.)

... If you are younger than age 70½ at the end of 2020, you anticipate that you will not itemize your

deductions in later years when you are 70½ or older, and you don't now have any traditional IRAs,

establish and contribute as much as you can to one or more traditional IRAs in 2020. If these

circumstances apply to you, except that you already have one or more traditional IRAs, make

maximum contributions to one or more traditional IRAs in 2020. Then, in the year you reach age

70½, make your charitable donations by way of qualified charitable distributions from your IRA.

Doing this will allow you, in effect, to convert nondeductible charitable contributions that you make

in the year you turn 70½ and later years, into deductible-in-2020 IRA contributions and reductions of

gross income from later year distributions from the IRAs.

... Take an eligible rollover distribution from a qualified retirement plan before the end of 2020 if

you are facing a penalty for underpayment of estimated tax and having your employer increase your

withholding is unavailable or won't sufficiently address the problem. Income tax will be withheld

from the distribution and will be applied toward the taxes owed for 2020. You can then timely roll

over the gross amount of the distribution, i.e., the net amount you received plus the amount of

withheld tax, to a traditional IRA. No part of the distribution will be includible in income for 2020,

but the withheld tax will be applied pro rata over the full 2020 tax year to reduce previous

underpayments of estimated tax.

... Consider increasing the amount you set aside for next year in your employer's health flexible

spending account (FSA) if you set aside too little for this year and anticipate similar medical costs

next year.

... If you become eligible in December of 2020 to make health savings account (HSA) contributions,

you can make a full year's worth of deductible HSA contributions for 2020.

... Make gifts sheltered by the annual gift tax exclusion before the end of the year if doing so may

save gift and estate taxes. The exclusion applies to gifts of up to $15,000 made in 2020 to each of an

unlimited number of individuals. You can't carry over unused exclusions from one year to the next.

Such transfers may save family income taxes where income-earning property is given to family

members in lower income tax brackets who are not subject to the kiddie tax.

... If you were in federally declared disaster area, and you suffered uninsured or unreimbursed

disaster-related losses, keep in mind you can choose to claim them either on the return for the year

the loss occurred (in this instance, the 2020 return normally filed next year), or on the return for the

prior year (2019), generating a quicker refund.

... If you were in a federally declared disaster area, you may want to settle an insurance or damage

claim in 2020 in order to maximize your casualty loss deduction this year.

Year-End Tax-Planning Moves for Businesses & Business Owners

... Taxpayers other than corporations may be entitled to a deduction of up to 20% of their qualified

business income. For 2020, if taxable income exceeds $326,600 for a married couple filing jointly,

$163,300 for singles, marrieds filing separately, and heads of household, the deduction may be

limited based on whether the taxpayer is engaged in a service-type trade or business (such as law,

accounting, health, or consulting), the amount of W-2 wages paid by the trade or business, and/or

the unadjusted basis of qualified property (such as machinery and equipment) held by the trade or

business. The limitations are phased in; for example, the phase-in applies to joint filers with taxable

income between $326,600 and $426,600, and to all other filers with taxable income between

$163,300 and $213,300.

Taxpayers may be able to achieve significant savings with respect to this deduction, by deferring

income or accelerating deductions so as to come under the dollar thresholds (or be subject to a

smaller phaseout of the deduction) for 2020. Depending on their business model, taxpayers also

may be able increase the new deduction by increasing W-2 wages before year-end. The rules are

quite complex, so don't make a move in this area without consulting your tax adviser.

... More small businesses are able to use the cash (as opposed to accrual) method of accounting in

than were allowed to do so in earlier years. To qualify as a small business a taxpayer must, among

other things, satisfy a gross receipts test. For 2020, the gross-receipts test is satisfied if, during a

three-year testing period, average annual gross receipts don't exceed $26 million (the dollar amount

was $25 million for 2018, and for earlier years it was $1 million for most businesses). Cash method

taxpayers may find it a lot easier to shift income, for example by holding off billings till next year or

by accelerating expenses, for example, paying bills early or by making certain prepayments.

... Businesses should consider making expenditures that qualify for the liberalized business property

expensing option. For tax years beginning in 2020, the expensing limit is $1,040,000, and the

investment ceiling limit is $2,590,000. Expensing is generally available for most depreciable property

(other than buildings) and off-the-shelf computer software. It is also available for qualified

improvement property (generally, any interior improvement to a building's interior, but not for

enlargement of a building, elevators or escalators, or the internal structural framework), for roofs,

and for HVAC, fire protection, alarm, and security systems. The generous dollar ceilings mean that

many small and medium sized businesses that make timely purchases will be able to currently

deduct most if not all their outlays for machinery and equipment. What's more, the expensing

deduction is not prorated for the time that the asset is in service during the year. The fact that the

expensing deduction may be claimed in full (if you are otherwise eligible to take it) regardless of how

long the property is in service during the year can be a potent tool for year-end tax planning. Thus,

property acquired and placed in service in the last days of 2020, rather than at the beginning of

2021, can result in a full expensing deduction for 2020.

... Businesses also can claim a 100% bonus first year depreciation deduction for machinery and

equipment bought used (with some exceptions) or new if purchased and placed in service this year,

and for qualified improvement property, described above as related to the expensing deduction.

The 100% write-off is permitted without any proration based on the length of time that an asset is in

service during the tax year. As a result, the 100% bonus first-year write-off is available even if

qualifying assets are in service for only a few days in 2020.

... Businesses may be able to take advantage of the de minimis safe harbor election (also known as

the book-tax conformity election) to expense the costs of lower-cost assets and materials and

supplies, assuming the costs don't have to be capitalized under the Code Sec. 263A uniform

capitalization (UNICAP) rules. To qualify for the election, the cost of a unit of property can't exceed

$5,000 if the taxpayer has an applicable financial statement (AFS; e.g., a certified audited financial

statement along with an independent CPA's report). If there's no AFS, the cost of a unit of property

can't exceed $2,500. Where the UNICAP rules aren't an issue, consider purchasing such qualifying

items before the end of 2020.

... A corporation (other than a large corporation) that anticipates a small net operating loss (NOL) for

2020 (and substantial net income in 2021) may find it worthwhile to accelerate just enough of its

2021 income (or to defer just enough of its 2020 deductions) to create a small amount of net income

for 2020. This will permit the corporation to base its 2021 estimated tax installments on the

relatively small amount of income shown on its 2020 return, rather than having to pay estimated

taxes based on 100% of its much larger 2021 taxable income.

... To reduce 2020 taxable income, consider deferring a debt-cancellation event until 2021.

... To reduce 2020 taxable income, consider disposing of a passive activity in 2020 if doing so will

allow you to deduct suspended passive activity losses.


∙ As of press time, individuals must file returns by April 15, 2021, for the 2020 tax year, unless you

are living abroad on April 15, 2021 and then you have an AUTOMATIC EXTENSION for filing until June

15, 2021.

-Partnerships must file returns by the 15th day of the third month following the close of the

taxable year (March 15 for calendar‐year taxpayers);  

- C corporation returns are generally due by the 15th day of the fourth month following the close

of the taxable year (April 15 for calendar‐year taxpayers);   

 c-S corporation returns will remain due by the 15th day of the third month of the taxable year

(March 15 for calendar‐year taxpayers); and

-W‐2s and 1099s must be filed by January 31, 2020, for the 2020 tax year.  


The ideas discussed in this letter are a good way to get you started with year‐end planning, but

they are no substitute for personalized professional assistance. Please do not hesitate to email us

with questions or for additional strategies on reducing your tax liability. We can then set up a phone, skype

 or whatsapp consultation.  EMAIL US    US Phone 949-480-1235


There is still time to do some year end tax planning to reduce your taxes READ MORE ABOUT HOW TO SAVE HERE  

December 2, 2020

Six tax planning strategies for low-cost-basis cryptocurrency

 Though the following article from the TAX ADVISORY was written for accounts, if you invest in crypto currencies it is a excellent template for planning your crypto transactions. The IRS is currently working
hard on getting on top of all crypto transactions which are required to be reported on your US tax return. For 2020 they will have a yes or no question asking if you own crypto currency.  They can later your answer against you for civil and criminal penalties if they discover you did not answer truthfully.