Following the last post, is this milestone of angel investor tax credit awards something to celebrate? Well, from the perspective of an investor this year, maybe not: my example tax credit of $1,618.26 ($3,500 * 0.46…) is quite a bit less than the $3,500 I was...
First, some background. The angel investor tax credit in South Carolina is a state income tax credit of up to 35% of the amount invested in an eligible SC-based company. So, if you invested $10,000 in a qualified business, you can take up to $3,500 off your future SC...
Amidst all the current challenges, and although the deadlines have changed, one thing is certain: a lot of people are working on their taxes. Among the work involved in preparing tax returns for VentureSouth’s investment entities is passing South Carolina angel...
So to recap:Angel investments aim to generate cap gains (which is better than ordinary income)Frequently, those gains are totally exempt from capital gains under Section 1202 (which is better than pretty much every other asset you can invest in ).If they’re not...
You hopefully noticed that the really great benefits of Section 1202 and Section 1045 were focused on C-Corps. They don’t apply if you invest in an LLC. Do LLCs have some alternative benefits? Yes, they do: pass-through losses.As quick background: An LLC is a...
So far, all the posts in this angel taxes series have been about federal taxes. Some states’ capital gains match the federal treatments; some don’t (being an angel investor in California is much more expensive post-tax than in the Carolinas!).But today’s post moves us...
Yes, there are some limits on Section 1244 losses. The $50k / $100k is one. Another is that it only applies to the first $1M that went into a company. This is almost always true of “family and friends” money; it’s often true of the angel rounds; it’s generally not...
Section 1244 gets even shinier.In usual capital loss situations, you really need capital gains to offset the losses against, because you can only take up to $3,000 in net capital loss in a given year. (You roll forward the rest to future years). But under 1244, you...
The “silver lining” from the last post of being able to write off the capital loss against other capital gains was a dull, scuffed silver. Today’s silver lining, called Section 1244, is a burnished, luminous, refulgent gleaming silver. Section 1244 of the tax code...
The angel taxes posts in this series so far have covered when angel investing goes well. What about when things go wrong?In general, if you lose money on an investment, you can offset that “capital loss” against a capital gain you have from something else.For example,...