Taxes

Depreciation Recapture Rate The 25% federal tax rate applied to gains from real estate depreciation previously claimed as a deduction.

Depreciation Recapture Timing in an Installment Sale In an installment sale, depreciation recapture is recognized fully in the year of sale, not spread across payments, even though gain recognition is deferred.

Depreciation Schedule Reset on Inherited Rental Property How heirs establish a new depreciable basis at fair market value and restart the depreciation schedule for inherited rental property.

Direct Indexing Vehicle Strategy of holding individual stocks that comprise an index rather than buying the index fund itself, enabling tax-loss harvesting and customized screening.

Direct Tuition and Medical Gift Exclusion Unlimited exclusion for payments made directly to educational institutions or medical providers on another's behalf.

Disclaimer Trust Provisions The right of an heir to refuse inherited assets for tax-planning purposes, allowing redirection to other beneficiaries or trusts.

Donor-Advised Fund A charitable giving account that provides an immediate tax deduction while allowing donations to grow and be distributed over time.

Double Step-Up in Basis for Community Property at Death Community property states grant a double step-up in basis when one spouse dies, allowing both halves of jointly owned property to reset to fair market value—a significant estate planning advantage.

Dynasty Trust Planning Multi-generational trust strategy designed to minimize transfer taxes across generations while maintaining family control.

Early Withdrawal Penalty Exceptions IRS exemptions to the 10% early withdrawal penalty for IRAs and 401(k)s, which apply to each account type, and how the rules differ.

Earned Income Credit Structure Tax credit formula that expands with earnings up to a plateau, then phases out at higher incomes, delivering maximum benefit to low-wage workers while reducing marriage penalties.

Effective tax rate for investors Your effective tax rate is your total federal income tax divided by total income. It is lower than your marginal rate and reflects your average tax burden.

Employee Stock Ownership Plan Tax Treatment for Employees How ESOP shares are taxed at distribution, net unrealized appreciation elections, and rollover options available to participating employees.

Endowment Fund Structure Perpetual investment vehicle managed to sustain institutional spending in perpetuity, with rules-based withdrawals tied to inflation and asset growth.

Equity Compensation and AMT Exposure Why exercising incentive stock options creates an alternative minimum tax preference item even without selling shares, how to estimate your AMT hit, and strategies to manage the exposure.

Estate Tax Clawback Risk After Exemption Reduction Understand whether gifts made under a higher exemption face estate tax clawback risk if the exemption later falls, and how IRS anti-clawback rules protect past gifts.

Estate Tax Exemption Sunset and the 2025 Cliff What happens to the $13M+ unified exemption if Congress allows TCJA provisions to expire—and the planning deadline before rates double.

Estate tax for investors Estate tax is the federal tax on large estates transferred at death. It applies to estates exceeding an exemption (nearly $13.61 million in 2024). Investors use strategies like portability and trusts to minimize it.

Estate Tax on Retirement Accounts: IRAs and 401(k)s at Death Estate tax on IRA 401k at death: retirement account balances are included in the gross estate and taxed twice—both estate tax and income tax—with an IRD deduction partially offsetting.

Estate Tax Portability Explained How estate tax portability lets a surviving spouse use a deceased spouse's unused federal exemption and the election required to preserve it.

Estimated Tax Payments for Investors When investors with capital gains and dividends must make quarterly estimated tax payments to the IRS, how to calculate safe-harbor amounts, and the underpayment penalty rules.

ETF In-Kind Redemption Tax Advantage Explained How the ETF in-kind redemption tax advantage lets fund sponsors remove low-basis shares and sidestep capital gains distributions to shareholders.

ETF vs Mutual Fund Tax Efficiency ETF vs mutual fund tax efficiency: ETFs avoid capital gains distributions via the creation-redemption mechanism; mutual funds force taxable distributions; differences matter most in taxable accounts.

Excess Business Loss Limitation for Non-Corporate Taxpayers The excess business loss limitation caps annual deductions of business losses against non-business income under TCJA rules; excess amounts convert to NOLs.

Exchange Fund Tax Deferral Mechanics How exchange funds defer capital gains tax through diversification; the seven-year holding rule and tax treatment explained.

Family Limited Partnership Tax Treatment How an FLP consolidates family assets into a pass-through entity to claim valuation discounts for gift and estate tax, while maintaining centralized control.

Family Limited Partnership Valuation Discount How transfers of FLP interests to heirs qualify for minority and lack-of-marketability discounts, reducing gift and estate tax liability.

Federal and State Tax on Treasury Bond Interest Treasury bond interest is subject to federal income tax but exempt from state and local taxes. Learn how T-bills and coupon bonds are taxed differently and what you report.

Feeder Fund An investment fund that deposits substantially all assets into a single master fund, used for legal, tax, or distribution flexibility.

FIFO tax basis method FIFO (First In, First Out) is the default method of calculating cost basis, where the oldest tax lot is sold first. It is often tax-inefficient for long-term investors.

FIFO vs LIFO Cost Basis in Investing FIFO vs LIFO cost basis investing: how first-in first-out and last-in first-out accounting affect capital gains taxes on securities sales.

Five-Year Gift Tax Averaging for 529 Plans How the superfunding election lets donors front-load five years of annual gift exclusions into a 529 account in a single year.

Fixed Indexed Annuity Tax Deferral How interest credited inside a fixed indexed annuity defers tax until withdrawal, how distributions are taxed under the LIFO rule, and the surrender-charge interaction with taxes.

Foreign Tax Credit and Form 1116 How investors offset US taxes with foreign taxes paid on international dividends and gains; Form 1116 limitation calculation and simplified de minimis exemption.

Form 1098-H Tax form reporting health insurance costs paid by self-employed individuals for potential income tax deduction.

Form 1098-T IRS form reporting qualified education expenses and documenting eligible tuition and related costs for tax credits.

Form 1099-B Form 1099-B reports sales and redemptions of securities, including stocks, bonds, and mutual funds. It shows proceeds and cost basis, which you use to calculate capital gains.

Form 1099-B Proceeds vs Cost Basis Explained Form 1099-B reports the gross proceeds from securities sales and adjusted cost basis, whose difference determines realized gain or loss for tax reporting.

Form 1099-B: Reporting Multiple Lots Sold on the Same Day How brokers aggregate or itemize same-day sales of different lots on Form 1099-B and how you reconcile those with Form 8949.

Form 1099-B: What to Do When Cost Basis Is Not Reported 1099-B cost basis not reported: If Box 5 is checked, basis wasn't sent to IRS; you must reconstruct it and report it on Form 8949.

Form 1099-DIV Form 1099-DIV is a tax form issued by brokers and investment companies reporting dividend income and capital gain distributions. It is used to complete Schedule D and Schedule B on your tax return.

Form 1099-DIV Capital Gain Distributions From Mutual Funds How mutual funds issue 1099-DIV capital gain distributions and why you owe tax even when you did not sell shares yourself.

Form 1099-DIV: Qualified vs Ordinary Dividends Explained Understand how Form 1099-DIV splits dividends into qualified and ordinary categories and the tax rate each faces.

Form 1099-INT Form 1099-INT reports interest income from savings accounts, bonds, CDs, and other sources. Interest is taxed as ordinary income at your marginal tax rate.

Form 1099-INT and the Treasury Interest State Tax Exclusion How to identify and claim the state tax exclusion for U.S. Treasury interest reported on Form 1099-INT box 1.

Form 1099-MISC IRS form used to report miscellaneous income and payments received by individuals and sole proprietors, including freelance fees, rent, and prizes.

Form 1099-NEC Reporting form for nonemployee compensation and contract payments issued to independent contractors.

Form 1099-OID IRS tax reporting form for original issue discount from bonds, debt instruments, and certain other securities.

Form 1099-OID: Market Discount vs Original Issue Discount Explained Form 1099-OID reports Original Issue Discount (OID) and market discount on bonds. Understand how OID is built into bonds at issuance while market discount applies to secondary purchases.

Form 1099-R Reporting form for retirement-plan distributions; codes determine tax treatment, eligibility for rollovers, and whether early-withdrawal penalties apply.

Form 1099-R Distribution Codes Explained 1099-R distribution codes explained: decode box 7 codes (1, 2, 4, 7, G, H, etc.) to determine tax treatment of retirement plan, annuity, and IRA withdrawals.

Form 1099-R Distribution Codes Explained Decodes Box 7 distribution codes on Form 1099-R, showing which codes flag taxable events, penalty exceptions, early withdrawals, and Roth distributions.

Form 1099-R for Inherited IRA Distributions 1099-R inherited IRA distribution reporting: how inherited retirement account withdrawals appear on tax forms and why codes differ.

Form 1116 IRS form allowing individual investors to claim a foreign tax credit for income taxes paid to foreign governments on dividends and interest.

Form 1116 for Passive Income: Claiming the Foreign Tax Credit on Dividends Form 1116 foreign tax credit passive income lets investors reclaim foreign taxes withheld on dividends and interest, with passive-basket limits on how much credit you can claim.

Form 3115 IRS Form 3115: Application for Change in Accounting Method, used to request permission to change how business income, expenses, or deductions are accounted for.

Form 3115: Changing Depreciation Methods for Rental Property Form 3115 allows landlords to change or correct depreciation methods for rental property, triggering a Section 481(a) adjustment. Learn when to file and how the adjustment is taxed.

Form 3921 The ISO exercise reporting form that provides employees the data needed to compute AMT adjustments and verify required holding periods.

Form 3921: Incentive Stock Option Exercise and AMT Reporting Form 3921 reports the incentive stock option spread at exercise, which creates an AMT preference item. Understand how the spread affects Form 6251 and when AMT is triggered.

Form 3922 IRS form that establishes the purchase price and fair market value of ESPP shares for tax-reporting and qualifying-disposition calculations.