Rental real estate and the Net Investment Income Tax

With the implementation of the Net Investment Income Tax (NIIT) in 2013, many taxpayers involved in rental real estate transactions may want to take a closer look at their participation in these activities to determine whether their involvement is “passive” or “active.”  The NIIT applies to taxpayers who have net investment income AND modified adjusted gross income of $250,000 or more for joint filers, $125,000 or more for married filing separately filers, and $200,000 or more for single filers.  For purposes of the new NIIT, net investment income includes, among other things,  income from rental activities where the taxpayer is not actively involved in the operations of the rental activity (i.e. it is a passive activity of the taxpayer).

To determine whether or not a taxpayer is actively involved in their rental real estate transactions, there is a two-part test that a taxpayer can review to determine their involvement in these activities.  The first part of the test considers whether or not the taxpayer qualifies as a real estate professional.  To qualify as a real estate professional, more than one-half of the personal services the taxpayer performs during the tax year must be in real property trade or business AND the taxpayer must perform 750 hours of service or more in real property trade or business over the course of the tax year.  The second part of the test in considering a taxpayer’s involvement is to consider whether or not the taxpayer materially participates in each rental activity.  The determination of material participation of a taxpayer is a little more involved and can be established by satisfying one of seven tests and is therefore a bit more involved.  To hear more about these seven tests or to find out more about how your tax rate may be impacted by your rental real estate transactions, contact your tax professional.

Kristin R. Coleman, CPA

Screen capture using Windows' Snipping Tool

As I mentioned in a prior tip, there are several really easy ways to capture a picture of what is shown on your computer screen.  These features are very handy for preparing documentation, for passing along an error message to tech support, or any other time you need to “grab” a picture of what’s on your screen.  The two ways mentioned before were the use of the Print Screen key and the Alt-Print Screen key combination.  The Alt-Print Screen combination is especially useful because it captures only the window that you’re currently “focused” on.  Remember that once you’ve captured your screen (or your current window) you can immediately go to Word, Excel, or Outlook (for example) and Paste the captured image.

But there are some other situations where these solutions just don't quite do the job.  What if you need to capture just a small section of one window?  What if you want to capture two windows at once?  This tip will introduce you to a tool that can do those things.  It’s called the Snipping Tool.  It was first made available in some special editions of Windows XP and is available in all versions of Windows Vista, 7, and 8.  This tool is worthy of spending a little time with in order to get acquainted.  I’ll explain it first, but the video link below (less than one minute long) will demonstrate how to use it.  This tool is handy enough that I recommend “pinning” it to your Start menu or even your Taskbar (and I’ll show you how to do that, as well).

To launch the Snipping tool, begin by clicking the Windows button (see to the right) and begin typing “snip”.  Windows will locate the Snipping Tool's shortcut for you and show it to you as an option (see below).

 

Press Enter or click the Snipping Tool shortcut to launch it.  Now you’ve opened the Snipping Tool application.  Prior to Windows 8 your screen will change appearance (will get dimmer), which indicates that the Snipping Tool is now active.  (Note: On Windows 8, this won't happen until you click New.)  This also means that your next mouse click will “set” one corner of the rectangle to be captured.  Here’s what you do: click and hold the mouse to set that first corner, then (while still holding down the mouse button) drag the mouse pointer to the opposite corner of the area you want to select and release the mouse button.  That’s it!  You just “snipped” that section of your screen.  It's already on your clipboard.  You can immediately Paste that image into a program.  If you want to begin another “snip” just click the New button in the Snipping Tool window (see below).

 

There are several options inside the Snipping Tool (like drawing, erasing, capturing a shape other than a rectangle, etc.), but that’s enough for today.

Here’s the short video demonstrating how to use it.

 

BONUS TIP: If you want to pin the Snipping Tool to your Start Menu or your Taskbar, click the Start button and begin typing “snip”.  When you see Snipping Tool, right-click it and select either Pin to Taskbar or Pin to Start Menu.

Craig Rhinehart - Director of Information Technology

Purchasing state tax credits at year-end

As the year 2013 comes to a close, taxpayers and their advisors are looking for ways to trim their tax bills.  One way that has become increasingly popular in recent years is the purchase of state tax credits.  State tax credits can be purchased at a discount, saving taxpayers potentially thousands of dollars on their state income taxes.  There are a variety of different types of credits, including Low Income Housing Credits, Entertainment (or Film) Tax Credits, Retraining Tax Credits, and Jobs Tax Credits -- just to name a few.  While most of these credits have to be purchased prior to year-end, there are even some that can be purchased in 2014 but used to offset your 2013 state income tax.  We would welcome the opportunity to discuss your potential need for state tax credits. 

Jack J Pease, IV, CPA