Do you know the 5 Year plus One Day Rule ?

For homeowners, this tax law rule is critical for you to understand. Why ?…..well, just about everyone knows that when you sell your primary residence, you are entitled to exclude the first $250K/$500K of gain, depending on whether you file your taxes as a single taxpayer or Married Filing Joint.  There, of course, is a mathematical calculation you must complete ( and a Form to file with your personal income tax return.

What most of us do not know is that we can receive this capital gain exclusion again, and again, and again, as long as we abide by the 5 years plus 1-day rule. This rule essentially states that, as long as you lived in your primary residence for two (any two) of the last five years, you can again utilize this wonderful tax benefit.

On the opposite side,  losses resulting from the sale of your primary residence are not deductible, and if you meet a portion of the 5 years plus 1-day rule, you are eligible to receive a pro-rata share of the exclusion. Working with an expert Tax Accounting firm like Core Performance is the ideal way to ensure you achieve the maximum benefit from the tax code. Let us know how we can assist you? we are truly here to help in any way we can.

Happy New Year’s 2017 to all our Readers – here’s some valuable details for you to Digest!

December 28, 2016 · Posted in Accounting, Decision-Making Tips, Profitability Tips, Tax Planning · Comment 

Here are the most essential updated limits for 2017; as we have identified for our Business Owner and Family clients.

Social Security maximum wage base for 2017 increased to $127,200. Amounts withheld at the 6.2% rate from an employee will now be $7,886.40 with the employer matching it. A self-employed person will pay the employee’s and employer’s shares which will be almost $15,772.80. The 1.45% Medicare tax is in addition to this and there is no salary cap on that. The employer will match employee’s amount and the self-employed will pay both shares. The employee’s total withholding tax will be7.65% and self-employed will be 15.3% on amounts up to the wage base and 1.45% and 2.9% on amount over that.

Capital Gains: Maximum rate is 20% plus 3.8% if the Net Investment Income Tax applies. The 0% rate will apply to extent ordinary income is taxed at a rate below 25%. A 15% rate is for individuals taxed at a 25% ordinary income tax rate or higher but below the 39.6% rate. The rate is 25% for unrecaptured Section 1250 depreciation; and 28% for long term sales of collectibles.

Alternative Minimum Tax exemption for those married filing jointly will be $84,500 and for singles $54,300. The exemption starts to phase out when joint and single income exceeds $160,900 and $120,700.

Personal exemption is $4,050 and starts to phase out when joint and single AGI reaches $313,800 and $259,400.

Section 179 Depreciation: $510,000 with this amount being reduced when the cost of qualifying property exceeds $2,030,000.

Gift Tax Annual Exclusion: $14,000 per person receiving a gift. This is doubled if there is a consenting spouse.

Estate and Gift Tax Lifetime Exemption: $5,490,000. For gifts this is doubled if there is a consenting spouse.

IRA contribution limit is $5,500 and an extra $1,000 for those who are age 50 and over. The limits apply for both traditional and Roth IRAs. There are phase outs for traditional IRAs for taxpayers covered by an employer plan; and for Roth IRAs based on AGI.

401k, 403b and most 457 plan contribution limits: $18,000 plus $6.000 for taxpayers past their 50th birthday.

Defined contribution limits: $54,000 plus $6,000 for those past their 50th birthday. SEP plans are not eligible for the over age 50 additional contributions.

Solo 401k plan combined with a SEP: $54,000 plus $6,000 for those past their 50th birthday.

SIMPLE plan limits are $12,500. The extra over age 50 amount is $3,000.

Medicare Part B premiums for those over age 65: Joint Modified AGI up to $170,000, $134.00 per month; MAGI over $170,000 up to $214,000, $187.50; MAGI over $214,000 up to $320,000, $267.00; MAGI over $320,000 up to $428,000, $348.30; MAGI over $428,000, $428.60. The single limits are half of the joint MAGI amounts for the premiums shown. These amounts will be reduced somewhat if you have the Medicare premiums deducted from your monthly Social Security benefits. Tip: These payments are deductible as medical insurance premiums which is especially beneficial for self-employed taxpayers. The Modified AGI reported on your 2015 tax return determines your 2017 premiums. To reduce your MAGI for 2017 (almost too late for 2016) consider transferring part or all of your 2017 Required Minimum Distributions (up to $100,000) directly to a charity. This might help reduce your 2019 premiums. You should consult with a tax advisor for other strategies to reduce MAGI. Starting early in the year will give you the best opportunities for tax planning.

Retirement plan tip: Consider making your 2017 contributions in January 2017 or as early in the year as you could so the tax deferred earnings start. Also, some plan contributions for 2016 can be made in 2017 and some of the plans can be opened in 2017 for the 2016 tax year. Further, do not overlook IRA contributions for non-working spouses. Self-employed people with no employees should consider a solo 401k combined with a SEP – if you qualify for 2016, open it ASAP! This must be done before Dec 31, 2016.

There are other items but these cover the most items we get questions about. All of these amounts and limits should be checked for amount and applicability with our office as your tax advisor.

Use the Federal and State Tax Code to the Best of Your Advantage

Our business is built entirely on advising Entrepreneurs on profit and growth strategies, using accurate accounting and management reporting; and then we show them tax efficient investment plans and strategies to keep their wealth. In order to do this effectively, we structure our relationship with our Clients to meet regularly for review and updating of their plans and strategies so they fit into the present circumstances and goals. A big part of that is year-end timing and income/spending decisions to minimize the impact of taxes over the lifetime of the business. We can help your business succeed in these critical areas. We focus on achieving these goals for our Customers daily, so that when the time comes, we are ready to deliver results that matter to you. Please review our year-end Tax Guide, then drop me at note or place a call so we can set up a time to discuss your specific situation and requirements. You’ll be happy you did this, and your views about Accountants may change as well.

Peter P Cullen

949 478-4795


Tax Responsibilities with the ACA & Resolving Information Form 1095 Conflicts

Important Introductory Note: There are no special or specific due diligence requirements related to Affordable Care Act issues or specifically to Form 1095 information returns.

Our Planning document represents best practices for Tax Preparers and their Clients to gather necessary information to prepare 2015 tax returns, including information that may be helpful to demonstrate compliance with the ACA health coverage provision. General requirements on filing a complete and accurate tax return continue to apply. Tax Preparers are expected to resolve conflicting or contradictory statements from their clients during the return preparation process, as they do today.

Extensions: Due to the extensions for furnishing health care information forms (Notice 2016-04), some individual taxpayers may not receive a Form 1095-B, Health Coverage, or Form 1095-C, Employer Provided Health Insurance Offer and Coverage, by the time they are ready to file their 2015 tax return. While the information on these forms may assist in preparing a return, they are not required. Like last year, taxpayers can prepare and file their returns using other information about their health coverage. Individuals do not have to wait for their Form 1095-B or 1095-C in order to file.

Resolving conflicting information between Form 1095-A and Form 1095-B: In certain circumstances, some of which we have listed below, a client’s Form 1095-B may contain information that appears contradictory to their Form 1095-A, Health Insurance Marketplace Statement. In those situations, the preparer will need to ask clients about their specific circumstances to determine whether a client is eligible for the premium tax credit. Examples:

1. Reporting errors: If the issuer has reported information incorrectly on Form 1095-A or 1095-B, the client should contact the issuer of the form and ask for a correction. Because the issuer               also reports this information to the IRS, discrepancies should be resolved at the earliest opportunity.

2. Same month changes in coverage: If a client has coverage for at least one day during a month with one provider and switches coverage to another provider that takes effect later in the                     same month, both providers will report coverage provided during that month. This situation does not affect the client’s potential eligibility for the premium tax credit.

3. Retroactive eligibility determinations: A client may be retroactively determined to be eligible for government-sponsored insurance (Medicaid, for example). The client may receive both a               Form 1095-A and a Form 1095-B for an overlapping period. Although this may appear to be contradictory information, the client’s eligibility for the premium tax credit does not change                     until the first day of the first calendar month beginning after the date of the approval.

4. Eligibility for Medicaid or Medicare while enrolled in Marketplace coverage: In general, a client is not eligible for the premium tax credit for months in which the client is eligible for                         government-sponsored health coverage. Individuals are granted a short period of time to apply for and transition to government-sponsored coverage. However, any individual who fails by                 the last day of the third full calendar month following when he or she meets the criteria to enroll in the government-sponsored insurance, becomes ineligible for the premium tax credit as of             the first day of the fourth calendar month.

5. Supplemental private insurance coverage: The health care law does not prohibit individuals who have enrolled in Marketplace coverage from obtaining supplemental insurance from a                   private insurance provider. Therefore, dual coverage in this situation as reflected by a Form 1095-A and a Form 1095-B does not affect the client’s eligibility for the premium tax credit.

6. Dual enrollment:

Q. My client enrolled in a qualified health plan with Affordable Premium Tax Credit (APTC) based on a Marketplace determination or assessment that the client was ineligible for Medicaid or            CHIP  coverage. Subsequently, the client was determined eligible for Medicaid and was enrolled for several months while still enrolled in the qualified health plan. Should I treat my client as            eligible  for Medicaid and therefore ineligible for the premium tax credit for these months?

A. Generally, no. If a Marketplace makes a determination or assessment that an individual is ineligible for Medicaid or CHIP and eligible for APTC when the individual enrolls in a qualified               health plan, the individual is treated as not eligible for Medicaid or CHIP for purposes of the premium tax credit for the duration of the period of coverage under the qualified health plan                  (generally, the rest of the plan year). Accordingly, if your client was enrolled in both Medicaid coverage and in a qualified health plan for which advance credit payments were made for one or           more months of the year following a Marketplace determination or assessment that your client was ineligible for Medicaid, your client can claim the premium tax credit for these months, if               the client is otherwise eligible. The Marketplace may periodically check state Medicaid data to identify consumers who may be dual-enrolled, and direct them to return to the Marketplace to             discontinue their APTC. If you believe that your client may currently be enrolled in both Medicaid and a qualified health plan with advance credit payments, you should advise your client to             contact the Marketplace immediately.

Resolving reporting conflicts between Form 1095-A and Form 1095-C:

If a client receives a Form 1095-C that is marked in Box 14 with a code 1A, affordable offer of self-only minimum essential coverage, the client generally would not be eligible for the premium tax credit. However, the return preparer will need to ask clients about their specific circumstances to determine whether a client might still be eligible for the premium tax credit.

1. Reporting errors: If information is reported incorrectly on a Form 1095-A or Form 1095-C, the client should contact the issuer of the form and ask for a correction. Because the issuer also reports this information to the IRS, discrepancies should be resolved at the earliest opportunity.

2. Offers of affordable employer-sponsored insurance and Marketplace enrollment: Generally, individuals who are offered affordable self-only employer-sponsored coverage (in 2015, coverage that costs 9.56% or less of household income) are not eligible for the premium tax credit. There are some exceptions:

a. Employee safe harbor: In good faith, a client may provide accurate information to the Marketplace about the cost of employer sponsored insurance and the Marketplace may determine                  that the individual is eligible for advance payments of the premium tax credit. Under these circumstances, the client would still be eligible for the premium tax credit if he or she meets the                  other eligibility criteria even though the employer sponsored coverage would have been affordable based on the taxpayer’s actual household income. Note: If the client changed employers                 during the year and the new employer offered the client affordable coverage in subsequent months, the client must contact the Marketplace again to redetermine his or her eligibility for the               premium tax credit.

b. Employer-sponsored insurance offerings after Marketplace enrollment: If an employer extends an offer of affordable insurance during the year after the client had already enrolled in                     Marketplace coverage, the client generally is eligible for the premium tax credit until the first day of the first full month the employer coverage could have been effective.


Many of our clients are pleasantly surprised at how easy their life becomes after they take the first step toward visionary accounting with Core Performance Consulting.

We encourage you to call us at (949) 502-4680 or email us at to set up your no-cost, no-obligation consultation.

We’re Experts at Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”)

CoreGroupWe know all the Details of the Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”)

Congressional leaders unveiled a massive comprehensive package last week, which will not only keep the government funded through September 2016, but also addresses the extension of many valuable tax provisions. Some of the most relevant provisions of the new legislation are summarized below. As always, consult your Marcum Tax professional to discuss how these provisions can benefit you and your business for 2015 and future years.



Tax-free IRA contributions to charity after age 70 1/2 Made permanent
State and local sales taxes itemized deduction Made permanent
American Opportunity Tax Credit (College Costs) Made permanent with new restrictions to claim credit
Enhanced Child Tax Credit Made permanent with new restrictions to claim credit
Basis adjustment to stock of S corporations making charitable contributions of appreciated property Made permanent
Income exclusion for discharged mortgage debt Extended for two years (2015 through 2016)
Deduction of mortgage insurance premiums Extended for two years (2015 through 2016)
Deduction of qualified tuition & fees “above-the-line” Extended for two years (2015 through 2016)
Research Tax Credit   •   Made permanent
•   The credit is refundable up to $250,000 against employer payroll taxes for any business under five years of age and with less than $5 million in annual gross receipts
•     Private companies with less than $50 million in gross receipts can use the credit against Alternative Minimum Tax
Five-year holding period for S Corporation built-in gains for dispositions Made permanent
Subpart F exception for active financing income Made permanent
Qualified small business stock gain exclusion Made permanent
Work Opportunity Tax Credit   •   Extended through 2019
•   Increases the credit to 40% of first $6,000 of wages for individuals who have been unemployed for 27 weeks or more and have received unemployment compensation
CFC-related payment look-through rule Extended through 2019
Energy Efficient Commercial Building Deduction Extended for two years (2015 through 2016)
New Markets Tax Credit Extended through 2019 with an annual allocation of $3.5 billion and extends the carryover period to 2024
Production Tax Credit for Renewables Extended for five years (2015 through 2019)
Affordable Care Act “Cadillac Tax” Postponed the starting date from 2018 to 2020
Affordable Care Act Medical Device Tax Two year moratorium
Bonus depreciation   •   Extended for property placed in service through 2019 (2020 for certain long-lived and transportation property)
•   50% rate for 2015-2017, 40% rate for 2018, and 30% rate for 2019
Section 179 depreciation (first year expensing)   •   Made permanent
•   $500,000 expensing allowance and $2 million phase-out threshold which will be indexed for inflation for years after December 31, 2015
•   Computer software and HVAC units made eligible
•   Elimination of the Section 179 expensing cap for qualified real property beginning in 2016
15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements Made permanent

  • top-100-90x90
  • Client Center

  • Is Your Business Leaking Money?

    Want to Know the Top 10 Money Leaks in Your Accounting System?
    Enter your email below and get Peter's free report:
    You'll also receive our free newsletter full of QuickBooks and Business tips.
  • Our Certifications

  • Complimentary Consultation

    Want a free consult with Peter?
    Call us at 949-502-4680 or email us to schedule your free consult today.

  • Our Latest Testimonial

    “Peter Cullen is the best at what he offers- a comprehensive solution to managing a business thru QuickBooks.”
    --Debbie Biscotti,
    District Sales Manager at Ovation Payroll Service

  • Connect With Us