Learning Center for Tax and Financial Insights

In a move that could significantly shape the direction of Chicago's future housing policies, voters resoundingly rejected Mayor Brandon Johnson’s proposal to impose a tax hike on real estate transactions exceeding $1 million. The “Mansion Tax” measure, aimed at channeling funds into combating homelessness and supporting affordable housing initiatives, faced opposition from just over half of the electorate, dealing a setback to the first-term Democrat’s progressive agenda.Bloomberg referred to the rejection as a “blow” to 48-year-old Johnson.Voters’ stance on this issue also highlights Johnson's problems in translating his campaign pledges into tangible policies. Elected on a platform advocating for increased contributions from the city’s wealthiest residents, Johnson’s ambitious “Bring Chicago Home” campaign largely relied on the passage of the “Mansion Tax” proposal. From the start, opponents cautioned that such a tax hike could exacerbate the city’s already delicate real estate market, while proponents argued it could generate $100 million annually.“This is a city where we have already seen very large increases in taxes, very large increases in the cost of services because of policy decisions that have been made by the city government,” remarked John Hansen, a professor at the University of Chicago’s Department of Political Science, in Bloomberg’s piece.For example, the Markellos family, who owns a 10-unit apartment building in Chicago, found themselves confronting a shocking 440% property tax increase last year. Michael Markellos, who co-owns the complex with his mother, found himself facing a $17,494 bill for a one-bedroom apartment for just one year. Markellos expressed frustration over the astronomical spike, emphasizing that his building is comprised of simple one-bedroom units intended for downtown workers and college graduates.This recent property tax upheaval in Chicago echoes wider concerns about the area’s tax administration and assessment practices. The Cook County Assessor's Office, responsible for determining property values, faced scrutiny over its reclassification of apartments as residential properties, which reportedly led to the exorbitant tax increases faced by families like the Markelloses.

Article Highlights:COVID 2020 Economic Impact PaymentsRecovery Rebate CreditCredit Refund Is About to Expire$1,200 for Single Taxpayer and $2,400 for Married Couples plus $500 for Dependents.How To Claim the Credit if Not Previously ReceivedQualificationsFiling Deadline for Refund is May 17, 2024Background: In response to the economic fallout from the COVID-19 pandemic, the U.S. government enacted several measures to provide financial relief to Americans. Among these measures were the Economic Impact Payments (EIPs), also known as stimulus checks. These payments were part of broader legislation aimed at mitigating the financial strain on individuals and families across the country. However, not everyone who was eligible received these payments as expected. To address this, the IRS introduced the Recovery Rebate Credit (RRC), a mechanism allowing individuals to claim on their tax return any stimulus money they were owed but did not receive. With a May 17, 2024 deadline approaching for claiming 2020 refunds, it's crucial for taxpayers to understand how to claim the 2020 credit if they didn’t previously receive it.The first round of EIPs, authorized by the CARES Act in March 2020, provided up to $1,200 per eligible individual and $2,400 for married couples filing jointly, with an additional $500 for each qualifying child. A second round of payments, authorized in December 2020, offered $600 per eligible individual, $1,200 for married couples, and $600 for each qualifying child. In 2021, a third round of payments increased the amount to $1,400 per individual, $2,800 for joint filers, and $1,400 per dependent, regardless of age.The Recovery Rebate Credit was designed for those who did not receive one or both stimulus checks they were entitled to in 2020. This credit is claimed on the 2020 tax return, allowing taxpayers to receive the amount they were owed as part of their tax refund. It's important to note that the credit is also available for the third round of EIPs, but it is claimed on the 2021 tax return.The deadline for filing 2020 tax returns was extended to May 17, 2021, providing taxpayers additional time to claim the Recovery Rebate Credit. This extension is critical for those who have yet to receive their full stimulus payment amount, as it offers an opportunity to rectify this and ensure they receive the financial support they were entitled to. In most cases there is a deadline for claiming a 2020 tax refund that expires 3 years after the original extended deadline, which brings it to May 17, 2024.For those who have yet to claim their Recovery Rebate Credit, taxpayers must fill out their 2020 tax return accurately, paying special attention to line 30 on Forms 1040 and 1040-SR. This line is specifically designated for the Recovery Rebate Credit. Taxpayers should calculate the amount they believe they are owed and include it in their tax return. However, it's essential to understand that the IRS will review each claim to ensure accuracy. The amount entered on the tax return may be adjusted based on the IRS's calculations, which consider various factors, including dependency status and income levels.

Selling a property you have owned for a long period of time will frequently result in a large capital gain, and reporting all of the gain in one year will generally expose the gain to higher than normal capital gains rates and subject the gain to the 3.8% surtax on net investment income.Capital gains rates: Rather than being tax at ordinary income tax rates, that currently can be as high as 37%, long-term capital gains (LTCG) can be taxed at 0%, 15%, or 20% depending upon your overall taxable income for the year. “Long-term” means that you’ve owned the property you sold for over one year. In most cases, taxable income is your adjusted gross income less the standard deduction for your filing status, or itemized deductions claimed on Schedule A of Form 1040.At the low end, if you file a joint return with your spouse and your 2024 taxable income is $0 through $94,050, the LTCG rate is zero. The zero-rate taxable income limits for other filing statuses are $63,000 for head of household and $47,025 for single and married separate.If you file a joint return and your taxable income is $94,051 through $583,750 ($63,001 - $551,350 if head of household, $47,026 - $518,900 if single, or $47,026 - $291,850 if married separate), then the top long-term capital gains rate is 15%. If your taxable income exceeds the 15%-rate limit, the LTCG rate is 20%. As you can see, larger gains push you into higher capital gains rates.Surtax on net investment income – Tax law treats capital gains (other than those derived from a trade or business) as investment income upon which higher-income taxpayers are subject to a 3.8% surtax on their net investment income. A large gain may push your income over the threshold for this tax. The surtax is 3.8% of the lesser of (1) your net investment income or (2) the excess of your modified adjusted gross income (MAGI) over the threshold amount based on your filing status. The threshold amounts are:$125,000 for married taxpayers filing separately.$200,000 for taxpayers filing as single or head of household.$250,000 for married taxpayers filing jointly or as a surviving spouse. This is where an installment sale could fend off these additional taxes by spreading the income over multiple years.Here is how installment sales work. If you sell your property for a reasonable down payment and carry the note on the property yourself, you only pay income taxes on the portion of the down payment (and any other principal payments received in the year of sale) that represents taxable gain. You can then collect interest on the note balance at rates near what a bank charges. For a sale to qualify as an installment sale, at least one payment must be received after the year in which the sale occurs. Installment sales are most frequently used when the property that is sold is real estate, and cannot be used to report the sale of publicly traded stock or securities.Example: You own a lot for which you originally paid $10,000. You paid it off some time ago, leaving you with no outstanding mortgage on the lot. You sell the property for $300,000 with 20% down and carry a $240,000 first trust deed at 5% interest using the installment sale method. No additional payment is received in the year of sale. The sales costs are $9,000.Computation of GainSale Price $300,000Cost - $10,000Sales costs - 9,000Net Profit $281,000Profit % = $281,000/$300,000 = 93.67%

As parents, ensuring the financial security of our children is paramount. One effective tool for this is a custodial account, a financial mechanism designed to hold and protect assets for minors until they reach adulthood. In this article, we will explore what custodial accounts are, how to set them up, and why they're a crucial part of planning for your child’s financial future.What is a Custodial Account?A custodial account is a financial account established by an adult on behalf of a minor. There are two main types: the Uniform Transfers to Minors Act (UTMA) account and the Uniform Gifts to Minors Act (UGMA) account. These accounts can hold investments like stocks, bonds, mutual funds, and, in the case of UTMA accounts, non-financial assets like real estate and patents.Setting Up a Custodial AccountSetting up a custodial account is straightforward:Choose a Financial Institution: Start by selecting a bank or brokerage that offers custodial accounts.Decide on the Type of Account: Choose between UGMA and UTMA based on the type of assets you plan to transfer.Provide Necessary Information: You’ll need identification for both you and your minor, such as Social Security numbers and birth certificates.Transfer Assets: Once the account is open, you can transfer assets into it. These can be cash, stocks, bonds, or, for UTMA accounts, other types of property.The Time Value of MoneyThe earlier you start, the better. Thanks to the power of compound interest, even small amounts saved today can grow significantly over time. For example, investing $100 monthly with an average annual return of 7% will grow to over $50,000 in 18 years. This can provide a substantial financial foundation for your child’s future.Uncertain Future of Social Security

May 10 - Report Tips to EmployerIf you are an employee who works for tips and received more than $20 in tips during April, you are required to report them to your employer on IRS Form 4070 no later than May 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 8 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.May 31 - Final Due Date for IRA Trustees to Issue Form 5498Final due date for IRA trustees to issue Form 5498, providing IRA owners with the fair market value (FMV) of their IRA accounts as of December 31, 2023. The FMV of an IRA on the last day of the prior year (Dec 31, 2023) is used to determine the required minimum distribution (RMD) that must be taken from the IRA if you are age 73 or older during 2024.

May 10 - Social Security, Medicare and Withheld Income Tax File Form 941 for the first quarter of 2024. This due date applies only if you deposited the tax for the quarter in full and on time. May 15 - Employer’s Monthly Deposit DueIf you are an employer and the monthly deposit rules apply, May 15 is the due date for you to make your deposit of Social Security, Medicare, and withheld income tax for April 2024. This is also the due date for the nonpayroll withholding deposit for April 2024 if the monthly deposit rule applies.Weekends & Holidays:If a due date falls on a Saturday, Sunday or legal holiday, the due date is automatically extended until the next business day that is not itself a legal holidayDisaster Area ExtensionsPlease note that when a geographical area is designated as a disaster area, due dates will be extended. For more information whether an area has been designated a disaster area and the filing extension dates visit the following websites: