Gary Bode, CPA: NC's fantastic tax break deserves some tax planning to optimize it for your business. For a free phone consult call (910) 399-2705.
NC CPAs welcome the NC Department of Revenue’s new tax break for 2012. The tax break starts with your IRS 1040. NC allows up to a $50,000 deduction from the IRS’ Adjusted Gross Income (the bottom line of Form 1040 page 1) when it transfers to D-400 (NC’s personal tax return). If you’re married, the deduction is up to $50,000 apiece. At 7% this could be worth up to $3500 in NC tax savings for each spouse. Each spouse is treated separately. If the husband has $40,000 of business profit and the wife lost $20,000, the husband can still deduct the entire $40,000. Very cool.
The Biggest Wrinkle in NC G. S. 105-134.6(b)(22)?
The business income you can deduct can’t be passive. NC uses the federal IRC 469 section to define passive income. Examples of passive income include rental property profit if you’re not a real estate professional and federal Section 179 (special depreciation) deductions.
Federal Schedule C, E and/or F
Business income qualifying for the NC deduction for business income first appears in 1040’s Schedule C, E and F. Schedule C reports business activities run as a sole proprietor or a Single Member LLC.
“Initially it seems the taxpayer is punished for receiving payroll through these entities. Check with your NC CPA for tax planning tips.”
- Gary Bode, CPA Wilmington NC.
Schedule E reports Rental Property activities, Partnerships and S Corporations. Partnership and S Corporations report a Partners’ or Shareholder’s summarized information into a Schedule K-1 which flows into 1040’s Schedule E.
I’m a NC CPA with a virtual / remote office to accommodate folks outside the Wilmington NC area. NC taxes are an important part of tax planning for any business. And now it looks like standard strategies may need modification. For a free phone consult call (910) 399-2705.
