Posts Tagged "Capital Gains"

Make the most of your professional advisors

Posted on Jul 4, 2013

Who’s on your team? No, not your sports or reality-show dancing team, your business team, that group of professional advisors who are ready and willing to help you tackle tough financial decisions. Those decisions can have an effect on your taxes this year as well as in the future, so you want to be sure your advisors know each other – and are working together for your benefit. As you begin your midyear planning review, here are three areas where coordinating the advice you receive can pay off. * Investments. Capital gains and losses from sales of your securities affect your taxes, of course, but the kind of investments you make can also have an impact. For instance, buying municipal bonds to generate tax-free interest may result in the unintended outcome of creating income subject to the alternative minimum tax. * Insurance. The type of health insurance plan you select can have tax implications. An example: A Health Savings Account (HSA), used in conjunction with a high-deductible health plan, can save premium and tax dollars. You fund an HSA with pre-tax cash and take tax-free withdrawals to pay medical expenses. * Estate planning. Wills, trusts, and beneficiary designations provide the framework for carrying out your wishes after your death. Communication between your tax and legal advisors helps ensure that these documents offer the greatest protection for your heirs while minimizing estate tax consequences. Please call us to schedule a comprehensive review of your goals. We’re delighted to be part of your professional...

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Tweet shorts

Posted on May 8, 2013

* May 15 is the deadline for calendar-year nonprofit organizations to file 2012 information returns. * Taking an early withdrawal from your retirement account can cost you an extra 10% penalty tax. Get the facts first. * Withdrawals from a qualified retirement plan for certain medical expenses are not subject to the 10% penalty tax. * If your capital losses exceed your capital gains, you can deduct up to $3,000 each year against your other income. * This year medical expenses must exceed 10% of your adjusted gross income to be deductible. The rate is still 7.5% for those 65 and older. * Relief from past payroll taxes is available to certain employers who reclassify workers as employees instead of independent contractors. * The top tax scam on the IRS’s “dirty dozen” list is bogus e-mails sent by thieves trying to steal taxpayers’ financial information. * If you discover a mistake after filing your tax return, you can fix it by filing an amended return on IRS Form 1040X. * The IRS can use part or all of your tax refund to pay other federal or state debts that you owe. * If you owe overdue child support, state income tax, or student loans, the IRS may apply part or all of your tax refund to pay the debt. * If you have foreign bank, savings, or investment accounts, you may be required to file an “FBAR” report by June 28, 2013. * Credit cards should be considered a convenient way to pay, not a source of credit. Any balance due should be paid in full each month. * The Social Security Act became law in 1935, setting the official retirement age at 65. Today 13% of the U.S. population is 65 or...

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Congress averts tax portion of fiscal cliff

Posted on Jan 11, 2013

The “American Taxpayer Relief Act of 2012” approved by Congress just after we plunged over the “fiscal cliff” restores and modifies several expired tax breaks, but doesn’t address other issues. Here are the highlights of the new law’s provisions for individual taxpayers. * Individual income taxes. Only the wealthiest taxpayers face an income tax increase in 2013. A new individual tax rate of 39.6% will apply to single filers with income above $400,000 and joint filers with income above $450,000. Otherwise, the 2012 tax rate structure is permanently extended. However, beginning in 2013, a new 3.8% Medicare surtax authorized by the 2010 health care law also applies to certain high-income investors. * Capital gains and dividends. Under prior law, the maximum tax rate for net long-term capital gains would have been boosted to 20%, while qualified dividends were scheduled to be taxed at ordinary income rates, beginning in 2013. The new law extends the favorable 15% tax rate for most taxpayers and extends the zero tax rate for those in the 10% and 15% brackets for ordinary income. However, for single filers with income above $400,000 and joint filers with income above $450,000, the maximum tax rate on long-term gains and qualified dividends increases to 20%. * Alternative minimum tax. Retroactive to January 1, 2012, the new tax law permanently revamps the alternative minimum tax (AMT) to avoid increased exposure to this “stealth tax.” Without the latest fix, an estimated 30 million more filers would have been required to pay the AMT for the 2012 tax year. * Payroll tax holiday. The 2% reduction in payroll taxes ends. Employees will pay a 6.2% social security tax instead of the 2012 rate of 4.2%. Similarly, the social security tax rate for self-employed individuals reverts to 12.4% from 10.4%. * Itemized deductions and personal exemptions. Restrictions are imposed on high-income taxpayers with income above a specified threshold. For single filers with adjusted gross income (AGI) above $250,000 and joint filers with income above $300,000, certain itemized deductions are reduced by 3% above the threshold, but the overall reduction can’t exceed 80%. Personal exemptions are phased out above the same AGI thresholds without the 80% cap. * Tax extensions. The new law generally extends, for varying time periods and with certain modifications, several favorable provisions that had expired. The list includes the child, dependent care, adoption, and earned income credits; tax relief from the “marriage penalty”; the American Opportunity Tax Credit for higher education expenses; the deduction for tuition and related fees; the optional state sales tax deduction; the enhanced deduction for student loan interest; the $250 deduction for an educator’s classroom expenses; energy credits for qualified home improvements; a conservation donation tax benefit; and the tax-free IRA-to-charity contribution of assets up to $100,000 for taxpayers age 70½ and older. * Estate and gift taxes. The new law avoids drastic changes for several provisions that had officially ended after 2012. Significantly, the estate tax exemption, which had been scheduled to drop to $1 million from $5 million (inflation-indexed to $5.12 million in 2012) remains at $5 million with inflation indexing. Portability of exemptions between spouses is preserved. The top estate tax rate, which had been scheduled to increase from 35% to 55% in 2013, is bumped up to 40%. The estate and gift tax changes are permanent. * Business provisions. The new law also temporarily preserves several tax breaks for businesses — including the research credit, the enhanced work opportunity tax credit, a higher Section 179 deduction, 50% bonus depreciation and faster write-offs for qualified leasehold improvements — as well as extending unemployment benefits and higher payments to Medicare providers. This latest tax law is not likely to be the final word on taxes in 2013. Congress is once again talking about a complete revision of the tax code. Also, the spending side of the “fiscal cliff” issue is yet to be dealt with. Stay tuned for ongoing changes that could affect your personal and business tax...

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What’s ahead? Tax changes scheduled for 2013

Posted on Dec 27, 2012

Unless Congress acts by year-end, these are the changes you’ll see in the tax rules effective January 1, 2013. *SOCIAL SECURITY TAXES. Employee’s share will increase to 6.2% after 2012, up from 4.2%. *INCOME TAX RATES. 2012 rates of 10%, 15%, 25%, 28%, 33%, and 35% will change to 15%, 28%, 31%, 36% and 39.6% for 2013. *CAPITAL GAINS. Maximum long-term rate will increase from 15% to 20% after 2012. *DIVIDENDS. Top 15% rate will be eliminated; dividends will be taxed as ordinary income with a top rate of 39.6%. *CHILD TAX CREDIT. Current $1,000 credit per qualifying child will be reduced to $500 after 2012. *AMT. Exemption amounts will be $33,750 for singles, $45,000 for couples. *ESTATE TAX. Top 2013 rate will increase to 55% (up from 35%); exclusion amount will be reduced to $1,000,000 (down from 2012 amount of $5,120,000). *DEDUCTIONS & EXEMPTIONS. After 2012, higher-income taxpayers will again lose a portion of itemized deductions and personal exemptions. *DEPRECIATION. Section 179 expensing limit will be reduced to $25,000, with a total qualifying property limit of $200,000, down from 2012 levels of $139,000 and $560,000 respectively. 50% bonus depreciation will expire. *EDUCATION. Education savings account contribution limit will be $500, down from 2012 limit of $2,000. Expanded American Opportunity Credit will expire and be replaced by prior Hope Credit. *TAX EXTENDERS. These tax breaks expired at the end of 2011: Teachers’ classroom expense deduction, state and local sales tax deduction, tax-free charitable IRA distributions for those 70½ and older, higher education tuition deduction, business R&D credit, and 15-year depreciation for leasehold improvements and restaurant property. Stay tuned. Congress and President Obama may agree to extend or revise some or all of these provisions. We’ll keep you...

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