Tax Tips: July 2025

Renting to family and friends: Handle with care

Ordinarily, you can deduct the expenses of owning and operating a rental property. You may even be able to claim a loss if those expenses exceed your rental income (subject to certain limitations).

However, suppose you rent a property to a family member or friend for less than fair market rent, the IRS will consider the property a personal residence rather than a rental one. As a result, you’ll still have to report the rental income on your tax return, but you’ll lose many of the deductions associated with rental properties. On the bright side, depending on the circumstances, you may still be able to deduct some or all of your mortgage interest and property taxes.

Feeling philanthropic? Avoid splitting property among charities

When you make a bequest of property to a charity, its value is exempt from estate tax. However, according to the U.S. Tax Court, that may not be the case if you split an asset between two or more charities.

In one case, a donor left her 100% interest in a limited liability company (LLC) to two charities: 75% to a private foundation and 25% to a church. When she died, the LLC, which owned an interest in a mobile home park, was valued at just over $25 million. On her estate tax return, her estate deducted the LLC’s full value as a charitable donation.

The court agreed with the IRS that fractional interest discounts should be applied to each charity’s gift, reducing the combined charitable deduction by more than $4 million and triggering nearly $1.7 million in additional estate tax. To avoid this result, donors should consider leaving an asset to a single charity, such as a private foundation, and allow the foundation to determine its ultimate disposition.

Businesses are vulnerable to identity theft

Business owners, beware: online identity theft is a growing threat that can cripple your company or shut it down forever. Signs of business identity theft include being unable to file a tax return because one has already been filed using your Employer Identification Number, receiving a rejection for a routine extension, and obtaining tax transcripts that don’t match your tax returns.

To guard against this all-too-common cybercrime, install antimalware and antivirus software and deploy firewalls. Also, multifactor authentication should be used, sensitive files should be encrypted and backed up, and access to these files should be limited to authorized personnel. Contact us with questions, or search “business identity theft” on the IRS website.

Related Posts

Tax Strategies for Businesses – Part 1

The recently enacted Tax Cuts and Jobs Act (TCJA) has altered the tax landscape for a lot of businesses. Please consult your HM&M advisor if you would like to have a conversation about how your ...

July 24, 2018 read more...

Did You Know? The Upcoming Changes Impacting Estate and Gift Tax Law

The landscape of gift and estate tax planning is experiencing significant shifts, with the upcoming 2026 sunset looming as a pivotal moment for tax professionals and high-net-worth individuals. This article delves into the key points ...

June 1, 2024 read more...

3 strategies that can be used to increase your charitable giving “bang for the buck”

Do you make charitable contributions? If so, read on. We may be able to help you cut the costs of charitable giving – or increase the size of your contributions without costing any more in ...

November 13, 2018 read more...

Family Office Structuring in Light of Lender Ruling

Recent court rulings and tax reform legislation has an impact on family office expense deduction. The lack of definition and bright-line test determining “trade or business activities” means that we must carefully consider the distinct ...

August 20, 2019 read more...