Benefits provided by tax reform for small-business owners.
But the changes lawmakers made to the net operating loss (NOL) deduction rules can take a lot of money from your pocket.
You see, before tax reform, you could carry back the NOL to prior tax years and get refunds of taxes paid in those years. Or, you could have elected to wave the NOL carry-back and, instead, carry forward the NOL (to offset some or all of your taxable income in future years).
After-tax reform, you can no longer carry back the NOL (except for certain farming losses). And, your NOL carries forward can offset only up to 80-percent of your taxable income in a tax year.
That’s where the Tax Reduction Letter comes to the rescue.
Here’s some good news. In this article, we’ll explain five bold strategies that let you use your business losses in the current tax year and avoid the limits that the new NOL rules impose.
Five strategies you can use
Strategy #1: Roth IRA conversion.
When you do, you can use your loss to offset the income that you had to include because of the Roth IRA conversion.
Strategy #2: Eradicate your traditional IRA
To withdraw the IRA monies, and if you want to be tax-free, you have a traditional IRA to which you have made not allowable contributions, instead of converting it to a Roth IRA.
Strategy #3: Remove gains from property.
To offset the taxable benefits, you can use the business loss. For recognizing the gain, sell your appreciated assets.
Strategy #4: Increase in income.
You can pay the deductible expenses next year, but you have to collect the taxable cash now. To receive taxable income fast, we’ll tell you five ways.
Strategy #5: Fix deprecation errors, not in your favor.
You can save thousands of dollars in taxes if the legal strategy is used correctly.