The IRS allows you to deduct the cost of a residential rental building (excluding land) over 27.5 years. This creates a non-cash deduction each year — meaning you get a tax write-off without spending any money. A $300,000 building generates $10,909/year in depreciation deductions automatically.

Yes. Depreciation is based on the property's cost basis, not your equity. You can deduct the full depreciation amount regardless of how much you owe on the mortgage.

Depreciation taken during ownership is subject to recapture at a 25% rate when you sell. However, this can be deferred indefinitely using a 1031 exchange, or eliminated entirely if you hold the property until death and your heirs receive a step-up in basis.

You can catch up on all missed depreciation in a single year by filing IRS Form 3115 (Change in Accounting Method). This is a powerful strategy for landlords who have owned property for years without properly tracking depreciation.

No. Land does not wear out and cannot be depreciated. Only the building and improvements are depreciable. Properly allocating the land value (typically using the assessed value ratio from property tax records) is essential to maximizing your depreciation deduction.

Yes, if you itemize deductions. You can deduct interest on up to $750,000 of mortgage debt ($375,000 if married filing separately) on your primary residence and one second home. The deduction only makes sense if your total itemized deductions exceed the standard deduction ($30,000 for married filers in 2026).

Yes. Mortgage interest on a second home (vacation home or investment property used personally) is deductible on the same $750,000 combined limit. If the property is rented out, different rules apply and the deduction is taken on Schedule E.

Add up your mortgage interest, state and local taxes (up to $10,000), charitable contributions, and other itemizable expenses. If the total exceeds $15,750 (single) or $30,000 (married filing jointly) in 2026, itemizing saves you more money.

Only if the loan proceeds were used to buy, build, or substantially improve the home securing the loan. Home equity loans used for other purposes (paying off credit cards, vacations) are not deductible under current law.

Yes. Points paid on a mortgage to purchase your primary residence are generally deductible in the year paid. Points paid on a refinance must be deducted over the life of the loan.

A 1031 exchange allows you to sell an investment property and defer all capital gains taxes by reinvesting the proceeds into a like-kind replacement property. You must identify the replacement property within 45 days and close within 180 days, using a qualified intermediary to hold the funds.

Yes. Residential rental properties, commercial buildings, raw land, and even some types of personal property qualify. The property must be held for investment or business use — your primary residence does not qualify.

The deferred gain carries forward into the replacement property's adjusted basis. You can continue deferring it through a chain of 1031 exchanges. If you hold the property until death, heirs receive a step-up in basis and the deferred gain is eliminated entirely.

After selling your relinquished property, you have exactly 45 calendar days to identify up to three potential replacement properties in writing. Missing this deadline disqualifies the entire exchange and makes the full gain taxable immediately.

Yes — "like-kind" is broadly defined for real estate. You can exchange a single-family rental for a commercial building, raw land, or a multi-family property. The key is that both properties must be held for investment or business use.

Bonus depreciation allows businesses to immediately deduct 100% of the cost of qualifying assets in the year of purchase. The OBBBA (signed July 4, 2025) permanently restored 100% bonus depreciation for property placed in service after January 19, 2025. It applies to new and used equipment, vehicles, and qualified improvement property.

No. The OBBBA permanently restored 100% bonus depreciation for property placed in service after January 19, 2025. The prior phase-down schedule (40% in 2025, 20% in 2026, 0% in 2027) has been eliminated. This is now a permanent feature of the tax code.

Yes — unlike Section 179, bonus depreciation can create or increase a net operating loss (NOL). That NOL can be carried forward to future years to offset future income, or in some cases carried back to prior years for a refund.

Yes. Since 2017, bonus depreciation applies to both new and used qualifying property, as long as the property is new to you (you have not previously used it). This makes it possible to generate large deductions from purchasing used equipment, vehicles, or even existing rental properties.

Yes. You can elect out of bonus depreciation for a specific class of assets (e.g., all 5-year property) if you prefer to depreciate assets over their regular recovery period. This might make sense if you expect to be in a higher tax bracket in future years and want to preserve deductions for when they are worth more.

Yes. If you use your car for business purposes, you can deduct either the standard mileage rate ($0.725/mile in 2026) or your actual vehicle expenses (gas, insurance, repairs, depreciation) multiplied by the business-use percentage. You must keep a mileage log documenting the date, destination, business purpose, and miles driven.

The IRS standard mileage rate for business driving is $0.725 per mile in 2026. This rate covers gas, insurance, maintenance, and depreciation. You can also deduct actual tolls and parking fees separately on top of the mileage rate.

No. Commuting from your home to your regular workplace is not deductible. However, if you have a qualifying home office, all trips from your home to client sites, meetings, or other business locations are deductible business miles.

Yes. The IRS requires contemporaneous records documenting the date, destination, business purpose, and miles driven for each business trip. Apps like MileIQ, Everlance, or even a simple spreadsheet work well. Reconstructed logs created at tax time are a significant audit risk.

Yes. An LLC can deduct vehicle expenses either through an accountable plan (reimbursing the owner for business miles) or by having the LLC own the vehicle directly. For heavy SUVs over 6,000 lbs GVWR, Section 179 and bonus depreciation can generate massive first-year write-offs.

Yes. An LLC can deduct ordinary and necessary travel expenses including airfare, hotels, rental cars, taxis, and 50% of meals when the travel is primarily for business purposes. The trip must take you away from your tax home overnight, and the primary purpose must be business.

Yes, with limitations. If the primary purpose of the trip is business, you can deduct all transportation costs (flights, rental car) even if you add personal days. However, hotel and meal costs are only deductible for the business days. Document the business purpose of each day carefully.

Deductible business travel expenses include airfare, train or bus tickets, rental cars, taxis and rideshares, hotel accommodations, 50% of meals, tips, laundry, and business calls. The travel must be away from your tax home overnight and primarily for business purposes.

Cruise ship conventions and seminars have a special $2,000/day limit under IRC §274(h). The ship must be a US-flagged vessel, all ports of call must be in the US or its possessions, and the convention must be directly related to your business. Documentation requirements are strict.

Your tax home is the city or general area where your principal place of business is located — not necessarily where you live. Travel expenses are only deductible when you travel away from your tax home. If you work remotely from a home office, your home is your tax home, making most business travel deductible.

A backdoor Roth IRA is a two-step process: (1) contribute to a non-deductible Traditional IRA (no income limit), then (2) immediately convert the Traditional IRA to a Roth IRA. Since the contribution was made with after-tax dollars, the conversion is tax-free. This allows high earners to access Roth IRA benefits regardless of income.

Anyone with earned income can use the backdoor Roth strategy, but it is most valuable for individuals who exceed the Roth IRA income limits: approximately $165,000 (single) or $246,000 (married filing jointly) in 2026. Below these limits, you can contribute directly to a Roth IRA without the backdoor process.

Yes. The backdoor Roth IRA is a legal strategy explicitly acknowledged by Congress and the IRS. It has been available since 2010 when income limits on Roth conversions were eliminated. The strategy remains fully available in 2026.

The pro-rata rule requires you to calculate the taxable portion of a Roth conversion based on the ratio of pre-tax IRA funds to total IRA funds. If you have existing pre-tax Traditional IRA money, converting only the non-deductible contribution will trigger taxes on a proportional share. The cleanest backdoor Roth requires having no pre-tax IRA funds.

The backdoor Roth contribution limit is the same as the regular IRA limit: $7,500 per person in 2026 ($8,500 if age 50 or older). A married couple can each do a backdoor Roth for a combined $15,000/year in tax-free contributions.

A Simplified Employee Pension (SEP-IRA) is a retirement account for self-employed individuals and small business owners. It allows contributions of up to 25% of net self-employment income (after the SE tax deduction), with a maximum of $72,000 in 2026. Any self-employed person with net income can open a SEP-IRA.

A SEP-IRA can be opened and funded up to the tax filing deadline, including extensions. For a sole proprietor, this means you can open a SEP-IRA and make a 2026 contribution as late as October 15, 2027 (with an extension). This makes it the most flexible retirement plan for last-minute tax planning.

The SEP-IRA contribution limit is 25% of net self-employment income (after deducting half of self-employment tax), up to a maximum of $72,000 in 2026. For a freelancer with $100,000 in net income, the maximum SEP-IRA contribution is approximately $18,587.

For most self-employed individuals, a Solo 401(k) allows higher contributions because it includes both employee deferrals and employer contributions. A SEP-IRA is simpler to administer and can be opened after year-end. If you want maximum contributions and are willing to manage payroll, the Solo 401(k) wins. If simplicity is the priority, the SEP-IRA is excellent.

Yes. SEP-IRA contributions do not affect your ability to contribute to a Roth IRA (subject to income limits) or use the backdoor Roth strategy. However, having pre-tax SEP-IRA funds can complicate backdoor Roth conversions due to the pro-rata rule. Uncle Kam helps clients navigate this interaction.

Self-employed individuals can choose from a SEP-IRA (up to 25% of net self-employment income, max $72,000 in 2026), a Solo 401(k) (up to ~$70,000 plus $7,500 catch-up if over 50), a SIMPLE IRA, or a Defined Benefit Plan (which can shelter $100,000+ annually for high earners). The Solo 401(k) is typically the best option for most self-employed individuals because it allows both employee deferrals and employer contributions.

In 2026, a Solo 401(k) allows up to $24,500 as an employee deferral (plus $7,500 catch-up if over 50) plus up to 25% of net self-employment income as an employer contribution, for a combined maximum of approximately $70,000 ($77,500 with catch-up). This is significantly higher than a SEP-IRA for most income levels.

Generally no — you cannot contribute to both a Solo 401(k) and a SEP-IRA for the same self-employment income in the same year. However, you can have a Solo 401(k) for your self-employment income and participate in an employer's 401(k) at a day job, though combined employee deferrals across all plans are capped at $24,500 in 2026.

You must establish a Solo 401(k) by December 31 of the tax year to make employee deferrals for that year. Employer profit-sharing contributions can be made up to the tax filing deadline (including extensions). A SEP-IRA, by contrast, can be established and funded up to the tax filing deadline.

No — retirement contributions reduce income tax but not self-employment tax. SE tax is calculated on net self-employment income before retirement contributions. However, the deduction for half of SE tax reduces your AGI, which in turn reduces the base on which retirement contribution limits are calculated.

The personal Clean Vehicle Credit (§30D) for new EVs was repealed under the OBBBA for vehicles purchased after December 31, 2025. However, the Commercial Clean Vehicle Credit (§45W, Form 8936) for business-use EVs remains available at up to $7,500 for vehicles under 14,000 lbs. If you are buying an EV for business use, the commercial credit still applies. Book a call to confirm eligibility for your specific vehicle and use case.

To qualify for the full $7,500 credit, the vehicle must be a new plug-in electric vehicle with a battery capacity of at least 7 kWh, have a final assembly in North America, meet critical mineral and battery component sourcing requirements, and fall within MSRP limits ($55,000 for cars, $80,000 for SUVs and trucks). The IRS maintains a current list of qualifying vehicles at fueleconomy.gov.

Yes — starting in 2024, you can transfer the Clean Vehicle Credit to the dealer at the point of sale, effectively receiving the credit as a discount on the purchase price. This is beneficial if your tax liability is less than $7,500 or if you want the benefit immediately rather than waiting until you file your return. The dealer then claims the credit from the IRS.

Businesses can claim the Commercial Clean Vehicle Credit (Form 8936) for EVs used in business, which provides up to $7,500 for vehicles under 14,000 lbs GVWR and up to $40,000 for larger commercial vehicles. Unlike the personal credit, the commercial credit has no income limits and no MSRP caps. Businesses can also combine the credit with Section 179 expensing and bonus depreciation.

The personal Clean Vehicle Credit is non-refundable — it can reduce your tax liability to zero but cannot generate a refund. However, if you transfer the credit to the dealer at purchase, you receive the full benefit regardless of your tax liability. The Commercial Clean Vehicle Credit for businesses is also non-refundable but can be carried back 1 year or forward 20 years.

A home office must be used regularly and exclusively for business — a dedicated room or clearly defined space used only for work. A kitchen table where you occasionally work does not qualify. The space must be your principal place of business or where you meet clients.

No. The Tax Cuts and Jobs Act of 2017 eliminated the home office deduction for W-2 employees through 2025. Only self-employed individuals, freelancers, and business owners can currently claim the home office deduction.

You can deduct the business-use percentage of your internet bill. If your home office is 10% of your home's square footage, you can deduct 10% of your internet costs. If you use the internet exclusively for business (a separate business line), you can deduct 100%.

The simplified method allows you to deduct $5 per square foot of your home office, up to 300 square feet ($1,500 maximum). It is easier to calculate but often produces a smaller deduction than the actual expense method for most homeowners.

The home office deduction is not an automatic audit trigger. The IRS does scrutinize it, but a properly documented, legitimate home office is fully defensible. The key is the "exclusive use" requirement — the space must be used only for business, not as a guest room or general living area.

The annual gift tax exclusion is $19,000 per recipient in 2026 (indexed for inflation). You can give $19,000 to as many people as you want each year without filing a gift tax return or using any of your lifetime exemption. Married couples can combine their exclusions to give $38,000 per recipient per year through gift-splitting.

No — gifts within the annual exclusion ($19,000 per recipient in 2026) do not require a gift tax return (Form 709). However, if you make a gift that exceeds the annual exclusion to any one person, you must file Form 709 to report the excess, even if no gift tax is due (the excess reduces your lifetime exemption).

Yes — gifts above the annual exclusion reduce your lifetime gift and estate tax exemption (approximately $15 million+ per person in 2026, permanently doubled under the OBBBA). As long as your total lifetime taxable gifts (above annual exclusions) do not exceed the exemption, no gift tax is due. Only when cumulative taxable gifts exceed the lifetime exemption does gift tax apply at 40%.

Yes — the annual exclusion applies to gifts to any individual, including grandchildren. However, large gifts to grandchildren (or great-grandchildren) may also trigger the Generation-Skipping Transfer (GST) tax, which has its own exemption (approximately $15 million+ in 2026, permanently doubled under the OBBBA). Gifts within the annual exclusion are automatically exempt from GST tax.

Yes — you can elect to treat a lump-sum contribution to a 529 plan as if it were made ratably over 5 years, allowing you to contribute up to $95,000 per beneficiary ($190,000 for married couples) in a single year without gift tax consequences in 2026. This is called the "superfunding" election and must be reported on Form 709.

The Augusta Rule (IRC Section 280A(g)) allows homeowners to rent their personal residence for up to 14 days per year and receive the rental income completely tax-free — no reporting required on Schedule E. Business owners exploit this by renting their home to their own business for legitimate business meetings, retreats, or events. The business deducts the rental payment; the homeowner receives it tax-free.

The rental rate must be the fair market rate for comparable event space in your area — what a hotel or event venue would charge for a similar space. You should document the market rate with comparable venue quotes or rental listings. Charging an inflated rate is a red flag for the IRS. Typical rates range from $500 to $2,500/day depending on the size and location of the home.

You need: (1) a written rental agreement between you personally and your business, (2) a legitimate business purpose for each rental day (board meeting agenda, planning retreat notes, etc.), (3) evidence of fair market rental rate (comparable venue quotes), (4) a business check or ACH payment from the business to you personally, and (5) minutes or notes documenting the business activities conducted at the home.

No — the tax-free treatment only applies to the first 14 days of rental per year. If you rent your home to your business for more than 14 days, all rental income becomes taxable (reported on Schedule E), and you must allocate expenses between personal and rental use. The 14-day limit is absolute; exceeding it eliminates the tax-free benefit for the entire year.

Yes — the Augusta Rule works for any business structure (sole proprietorship, LLC, S-Corp, C-Corp). For S-Corp owners, the rental payment is a deductible business expense for the S-Corp and tax-free rental income for the shareholder. The strategy is particularly valuable for S-Corp owners because it moves money from the S-Corp (where it would be subject to income tax) to the owner (where it is tax-free under the 14-day rule).

When you inherit an asset, your cost basis is "stepped up" to the fair market value on the date of the decedent's death (or an alternate valuation date 6 months later). This means all appreciation during the decedent's lifetime is permanently erased for capital gains purposes. If you sell the asset immediately after inheriting it, you owe zero capital gains tax on the lifetime appreciation.

Most capital assets that pass through an estate receive a step-up: stocks, bonds, mutual funds, real estate, business interests, and collectibles. Assets held in IRAs and 401(k)s do not receive a step-up — they are subject to ordinary income tax when withdrawn. Assets in irrevocable trusts may or may not receive a step-up depending on how the trust is structured.

In community property states (California, Texas, Arizona, Nevada, Washington, Idaho, Louisiana, New Mexico, Wisconsin), both halves of community property receive a step-up in basis when one spouse dies — not just the deceased spouse's half. This is a significant advantage over common law states, where only the deceased spouse's share receives the step-up.

For very large embedded gains, holding appreciated assets until death can eliminate the capital gains tax entirely through the step-up in basis. However, this strategy must be weighed against estate tax exposure (if the estate exceeds the exemption), liquidity needs, and the opportunity cost of holding a concentrated position. Uncle Kam can model the tradeoffs for your specific situation.

Yes — donating appreciated assets to a qualified charity or Donor-Advised Fund eliminates the capital gains tax and generates a charitable deduction for the full fair market value. This is often more tax-efficient than holding until death (which avoids capital gains but may trigger estate tax) or selling and donating cash (which triggers capital gains before the donation).

A Donor-Advised Fund (DAF) is a charitable giving account sponsored by a public charity (such as Fidelity Charitable or Schwab Charitable). You contribute cash, securities, or other assets to the DAF, receive an immediate tax deduction for the full contribution, and then recommend grants to qualified charities over time. The assets grow tax-free inside the DAF until distributed.

Cash contributions to a DAF are deductible up to 60% of AGI. Contributions of appreciated securities are deductible at fair market value up to 30% of AGI. Excess contributions carry forward for up to 5 years. Unlike private foundations, DAFs have no minimum distribution requirement.

Bunching means contributing multiple years of planned charitable giving into a DAF in a single year to exceed the standard deduction threshold and itemize. For example, instead of donating $10,000/year for 5 years (which may not exceed the standard deduction), you contribute $50,000 in Year 1 to a DAF, take the full itemized deduction, and then distribute $10,000/year to charities from the DAF over the following 5 years.

Yes — and this is one of the most powerful aspects of a DAF. You can contribute long-term appreciated stock directly to the DAF, deduct the full fair market value (up to 30% of AGI), and avoid paying capital gains tax on the appreciation. The DAF can then sell the stock tax-free and invest the proceeds for future charitable distributions.

A DAF is simpler and cheaper to establish (no legal fees, no IRS approval), has no minimum distribution requirement, offers higher deduction limits, and provides anonymity for grants. A private foundation offers more control (you can hire family members, make program-related investments, and set your own grant criteria) but requires 5% annual distributions, has lower deduction limits, and faces excise taxes on investment income.

Tax-loss harvesting is the practice of selling investments at a loss to offset capital gains from other investments, reducing your overall tax liability. The harvested losses first offset capital gains dollar-for-dollar. If losses exceed gains, up to $3,000 of excess losses can offset ordinary income per year. Remaining losses carry forward indefinitely to future years.

The wash-sale rule disallows a loss deduction if you buy the same or "substantially identical" security within 30 days before or after the sale. To avoid triggering the rule, you can immediately reinvest in a similar but not identical security (e.g., sell a Vanguard S&P 500 ETF and buy a Fidelity S&P 500 ETF), wait 31 days before repurchasing, or use the loss to rebalance your portfolio.

No — losses in tax-deferred accounts (IRA, 401(k)) cannot be harvested because all gains and losses inside those accounts are tax-deferred. Tax-loss harvesting only applies to taxable brokerage accounts. This is one reason why it can be beneficial to hold more volatile assets in taxable accounts where losses can be harvested.

Yes — and cryptocurrency has a significant advantage: the wash-sale rule does not currently apply to crypto (it applies only to "securities" under the tax code, and crypto is classified as property). This means you can sell crypto at a loss, immediately repurchase the same coin, and still claim the loss deduction. This may change with future legislation.

Capital losses first offset capital gains of the same type (short-term losses offset short-term gains; long-term losses offset long-term gains). Excess losses can offset gains of the other type. After offsetting all capital gains, up to $3,000 of net capital losses can offset ordinary income per year. Remaining losses carry forward indefinitely.

No — as of 2026, the wash-sale rule (which disallows a loss if you repurchase the same security within 30 days) does not apply to cryptocurrency. The IRS classifies crypto as property, not a security, so you can sell crypto at a loss and immediately repurchase the same coin without losing the tax deduction. This may change with future legislation, but for now it is a significant advantage over stock tax-loss harvesting.

The IRS treats cryptocurrency as property. Selling, trading, or spending crypto triggers a capital gain or loss equal to the difference between your cost basis and the sale price. Short-term gains (held less than 1 year) are taxed as ordinary income; long-term gains (held more than 1 year) are taxed at 0%, 15%, or 20% depending on your income. Receiving crypto as payment for services is taxed as ordinary income.

Net capital losses (including crypto losses) can offset up to $3,000 of ordinary income per year. Losses above $3,000 carry forward to future years to offset future capital gains or additional ordinary income. There is no limit on how many years losses can carry forward.

Trading one cryptocurrency for another (e.g., Bitcoin for Ethereum) is a taxable event — you must report the gain or loss on each trade. Using crypto to purchase goods or services is also taxable. Simply holding crypto (HODLing) is not a taxable event. Receiving crypto as a gift is not taxable until you sell it (your basis is the donor's basis or the fair market value on the date of the gift, whichever is lower).

You must track: the date of each acquisition, the cost basis (purchase price plus fees), the date of each sale or exchange, the sale proceeds, and the resulting gain or loss. For large portfolios with many transactions, crypto tax software (CoinTracker, Koinly, TaxBit) can automate this tracking. The IRS requires you to report all crypto transactions, and exchanges are required to issue 1099s for transactions above certain thresholds.