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New York State’s Real Estate Transfer Tax Undergoes Big Changes

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New York State has made several large changes to real estate transfer taxes that all New York residents should understand going forward. The changes will affect individuals buying and selling real property in the New York City area specifically.

The current real estate transfer tax has includes a base tax of $2 for each $500, or fractional part thereof, of consideration. In addition, there was (and remains) an additional tax of 1% of the consideration or part thereof attributable to the residential real property. This 1% tax only applies when the entire conveyance is $1 million or more; this is commonly referred to as the “mansion tax.”

The new transfer tax provisions now include an additional base tax of $1.25 for each $500 $3.25 per $500 total(), or fractional part thereof, of consideration on each conveyance of real property or interest therein within any city in New York having a population of 1,000,000 or more (i.e., New York City). The additional base tax applies to conveyances of residential real property of $3 million or more, and conveyances of $2 million or more on any other property (e.g., commercial buildings). As with the previous base tax, liability of the new additional base tax is paid by the seller.

On top of the additional base tax, New York also added a new supplemental progressive mansion tax of 2.9%, applied when consideration exceeds $25 million. This now creates a maximum mansion tax of 3.9% (1% + 2.9%) for buyers.

 

IRS clarifies deductibility of PPP loan expenses


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The Internal Revenue Service and the Treasury Department issued guidance to clarify treatment of expenses when a loan from the Small Business Administration’s Paycheck Protection Program that haven’t been forgiven by the end of the year.

According to the IRS and Treasury Department, since businesses aren’t taxed on the proceeds of a forgiven PPP loan, the expenses aren’t deductible. Makes sense, but what does it mean for your business?

It means that, should your business have received PPP loans, any expenses (payroll, utilities, rent) used by the PPP loan are not deductible on your 2020 taxes. This clarification came more than six months after many people applied, and received PPP loans.

“This results in neither a tax benefit nor tax harm since the taxpayer has not paid anything out of pocket,” said the Treasury in a news release. “If a business reasonably believes that a PPP loan will be forgiven in the future, expenses related to the loan are not deductible, whether the business has filed for forgiveness or not. Therefore, we encourage businesses to file for forgiveness as soon as possible.”

 

IRS Clarifies Regulations on Business Deductions for Meals & Entertainment

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The Internal Revenue Service has issued final regulations on the business expense deduction for meals and entertainment following changes made by the Tax Cuts and Jobs Act (TCJA) in 2017.

The 2017 TCJA generally eliminates the deduction for any expenses related to activities generally considered entertainment, amusement or recreation. However, taxpayers may still deduct business expenses related to food and beverages if certain requirements are met.

 (1) The item was directly related to the active conduct of the taxpayer’s trade or business (directly related exception); or

(2) in the case of an item directly preceding or following a substantial and bona fide business discussion (including business meetings at a convention or otherwise), the item was associated with the active conduct of the taxpayer’s trade or business.

These final regulations clarify the changes brought on by the TCJA and the disallowance of the deduction for expenditures related to entertainment, amusement or recreation activities. This change will certainly impact expense accounts for businesses large and small, as well as affecting the taxes for many businesses owners.

 

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.