Cut your 2014 taxes: Don’t Miss Out on Your 179 Deduction

The end of another year is quickly approaching, and it’s once again time to take the proper steps to reduce taxes on your personal and business returns. Tax planning strategies for 2014 includes accelerating deductions and deferring income.reduce-federal-taxes

Section 179 of the IRS tax code makes it possible for businesses to deduct the full price of qualifying equipment or software purchased or financed during the tax year. If you buy or even lease qualifying equipment, you are allowed to deduct the full price from your gross income up to a maximum deduction of $25,000 in 2014.

All businesses that purchase, finance, or lease less than $200,000 in new or used business equipment during tax year 2014 qualify for the Section 179 Deduction. If you spend more than $200,000 the Section 179 deduction begins to be reduced. This works great with your typical business.

Let’s say you purchased equipment, computers, etc.  here is an example that shows how Section 179 works:

Section 179 for 2014

Equipment purchased in 2014 $75,000
First year Section 179 write-off $25,000
Normal First year Depreciation (20% in each of the years on remaining amount) $10,000
Total 2014 Deduction

$35,000

Tax Savings assuming 35% tax bracket $12,250
After tax Equipment Cost in 35% tax bracket $62,750

Section 179 applies to virtually every type of  equipment you can buy. This includes passenger vehicles used 50% or more for business, however, there is are limitations. It also includes off-the-shelf software, qualified leasehold improvements and retail improvements.

There is one catch however, you need to place the property in service by December 31, 2014.

Year-end Tax Planning for Individuals

It’s that time of year again to begin taking the steps necessary to reduce taxes on your personal returns.  Below we have put together some tips to ensure you make the most of this planning time.1040 income tax form

Bunch your deductions: For example, bunching deductions on your personal income tax return can make sense for 2014. Bunching means you concentrate itemized deductions into the year offering the most tax benefit and claim the standard deduction in alternate years. Even if the current limitation on itemized deductions applies to you, bunching can be effective when combined with other tax planning such as reducing adjusted gross income.

  • One category of itemized deductions that lends itself to bunching is charitable contributions. In general, as long as you have written acknowledgment from a qualified charity, you can deduct donations in the year you write the check or put the charge on your credit card.
  • Instead of cash, donating appreciated assets before December 31 may be more tax advantageous. When you contribute property you have owned for more than a year, you can usually deduct the full fair market value.
  • For instance, say the value of the shares you own in a mutual fund has gone up since you bought into the fund. If you sell those shares and donate the proceeds to charity, you’ll have capital gain. But when you donate the shares to the charity, you can claim a deduction for the value on the date of your donation, garnering a benefit without the related income tax bill.
  • Other itemized deductions you can control in order to maximize tax savings include real estate taxes and state income taxes.

Check exposure to the AMT: Just remember to check your exposure to the alternative minimum tax and the 3.8% net investment income tax when deciding in which year to pay these tax bills. Why? Certain itemized deductions – such as taxes – are disallowed under the AMT rules, but can help reduce exposure to the net investment income tax.

  • What if you’re not planning to itemize? Taking a look at your deductions is still a useful exercise. One reason: The standard deduction is also disallowed under AMT rules, and you may benefit by itemizing even when your total itemized deductions are under the threshold.
  • The standard deduction for 2014 is $12,400 when you’re married filing jointly and $6,200 when you’re single.

Monitor adjusted gross income: Another tax planning strategy is to reduce adjusted gross income (AGI). One way to do this on your personal tax return is to maximize above-the-line deductions. These are expenses you can claim even if you don’t itemize. Above-the-line tax savers include such items as retirement plan contributions, student loan interest deduction, and the health savings account deduction.

Consider shifting income: A planning strategy to help reduce taxes on your personal returns is shifting income among family members.

  • An income-shifting technique is to make gifts of income-producing property to family members in lower tax brackets. (Be aware of the “kiddie tax.”) Though you can’t take a tax deduction for gifts, future income is taxed to the recipient, and may mitigate your exposure to the 3.8% net investment income tax.
  • Gifts of up to $14,000 per person ($28,000 when you’re married) made before year-end incur no income, gift, estate, or generation-skipping taxes.

Year-end Tax Planning for Businesses

The end of another year is fast approaching, and it’s once again time to take steps to reduce taxes on your business returns.  We know this can be a difficult process so we have put together some information below to help.Foreign-Property-Owners-Top-Tax-Tips

Set up a retirement plan. When you have a business, contributions to a self-employed retirement plan also reduce AGI above-the-line. Depending on the plan you choose, you can set up the paperwork before year-end and make contributions by the due date of your 2014 tax return.

  • For instance, say you’re the sole owner of your business. Establishing a 401(k) gives you the opportunity to set aside as much as $17,500 in salary deferral (plus an extra $5,500 if you’re over age 50). In addition, you can put up to 20% of your business profit into your plan.

Manage asset policies. Another tax-saving suggestion for your business is to review your asset management policies. Depreciation is probably the first thing you think of when you consider tax benefits for business assets. And you probably already know bonus depreciation expired at the end of 2013 and the Section 179 expensing deduction was reduced to $25,000 for 2014. (Be aware that Congress may reinstate the larger deductions.)

  • While accelerated depreciation tax rules affect your current year deduction, remember that changes to these rules have no impact on the total amount you can deduct over the life of an asset. In addition, you still have tax planning opportunities.
  • One such opportunity is to take advantage of the new repair and capitalization regulations. These rules, which generally take effect this year, provide safe-harbor thresholds for writing off the cost of certain business supplies, repairs, and maintenance. What you need to do before year-end: Create and implement a written policy to comply with the rules.
  • Another potential tax saver involving business assets: Examine the tax benefits of leasing business equipment instead of buying. Depending on the type of lease, you may be able to deduct payments in full as you make them. What’s the downside? Generally you’ll forfeit depreciation deductions. Run an analysis to determine which option will work best for you.

Consider shifting income. A planning strategy to help reduce taxes on your business returns is shifting income among family members. For your business, the strategy could mean hiring family members and paying a reasonable – and deductible – salary for work actually performed. You may be able to provide tax-deductible fringe benefits as well as save on payroll tax expense.

The Affordable Care Act: How will it affect your 2014 taxes?

Staggered start dates. Exceptions. Waivers. Are you still trying to determine how the health care laws will affect your 2014 personal and business federal income tax returns? We can help. Here’s an overview we’ve put together of some current rules. Here’s an overview of some current rules.BarackObamaportrait

Individual penalty. The 2014 Form 1040 has a new line for reporting the “individual responsibility payment.” You’ll owe this penalty if you or your dependents did not have health insurance during the year and don’t qualify for an exemption.

  • The amount you’ll report on your 2014 tax return is the greater of $95 per adult and $47.50 per child, up to a maximum family penalty of $285, or 1% of your “household income formula.”

Individual premium credit. Depending on your income, you may be eligible for a reduction in the cost of your health insurance premium during the year.

  • When you signed up for insurance on the health insurance exchange, you had the option to use the reduction to offset your premiums as you paid them. Alternatively, you can apply for the credit when you file your 2014 federal income tax return.
  • The amount of the credit depends on your income and family size.

Net investment income surtax. You may be familiar with this 3.8% surtax from last year’s return. It applies to net investment income – income such as dividends, interest, and capital gains, less related expenses – when your adjusted gross income (AGI) exceeds certain levels.

  • Those levels have not increased for 2014. When you are married filing jointly, the surtax applies if your AGI exceeds $250,000. When you’re single or filing as head of household, the AGI threshold is $200,000.

Medicare surtax on wages. As in 2013, this 0.9% surtax applies to wages, compensation, and self-employment income when your AGI exceeds $250,000 and you’re married filing jointly. When you’re single or filing as head of household, the AGI threshold is $200,000.

Business health insurance premium credit. Did you pay at least 50% of the health insurance premium costs for your employees during 2014? If you employed fewer than 25 full-time equivalent employees and paid them wages of less than $50,800, you may be able to claim a credit of up to 50% of the premiums you paid.

  • The credit is available even if you claimed it in prior years. Tax-exempt organizations can also benefit.

Business fee. When you self-insure your business health care expenses, you may have to pay a fee to help fund a healthcare research institute. The fee may also apply to your health reimbursement arrangement or health flexible spending arrangement.

Employer penalties. Depending on the number of workers you employ, you may be penalized for not providing health insurance and/or not providing affordable health insurance.

  • Neither penalty applies for tax year 2014. However, you’ll want to review your workforce to determine whether the penalty will affect you in the future.
  • Beginning January 1, 2015, the penalty will apply when 100 or more full-time employees work in your business. The penalty applies in 2016 when your business employs 50 or more full-time workers. When you employ fewer than 50 workers, you’re not subject to the penalty.
  • Employer reporting. The health care laws included a requirement for reporting on Forms W-2 the cost of the health insurance coverage you provide to your employees. However, reporting is optional for 2014 when you file fewer than 250 Forms W-2.

Get a Head Start on Your 2014 Tax Planning

 

Now is the time to get started on your 2014 tax planning!

2014 Tax Plannine

Take advantage of the unique opportunity that the beginning of the year brings for your tax planning! By looking back on the still-fresh prior events, you can look forward to determine what you can replicate or improve.

Individualize your plan

Your individual situation will dictate the tax-saving moves you should consider as you look back on 2013 and ahead to 2014. Please call us at 212-605-0276 for a review of the options that fit your circumstances. We’re ready to help you minimize your tax bill for 2013 and get a head start on smart tax planning for 2014.

Start with retirement plans

A good place to apply this tax strategy of looking back and looking forward is with your retirement plan contributions. An example of this is by making an after-year-end planning move by making a calendar-year 2013 contribution to your IRA until April 15, 2014. Any deductible contributions will reduce your 2013 tax bill.

Now let’s look ahead with this strategy by beginning to think about 2014 IRA contributions. By starting early you are able to set money aside for current contributions and to decide what mix of contributions offers the best tax advantages. The most that you can contribute to your IRA for 2013 and 2014 is $5,500 ($6,500 when you’re over age 50).

If you are a business owner, you can benefit from retirement plan tax savings too! It is not too late to set up a Simplified Employee Pension (SEP) plan for last year. Business can make contributions for 2013 until the due date of your tax return, so you could have until October 15 of this year to save money on last year’s return. The maximum contribution to a SEP for 2013 is $51,000 ($52,000 for 2014).

Retirement plans play a large role in tax-saving strategies because contributions reduce your adjusted gross income (AGI). For 2014, AGI, or a modified version of AGI, will affect your eligibility for various tax and nontax benefits. You will want to manage your income to keep it within the range that’s most advantageous to you.

Manage your income

How do you manage your income? One way is by making sure that you can take deductions that reduce your gross income. An example is, if you started a business and you are expecting it will take time to show profits, understanding the hobby loss rules can save money, these rules affect the amount you can deduct.

You can claim losses in full and apply the excess against other income on your personal tax return, reducing your AGI as a self-employed business owner. When your activity is a hobby, for tax purposes you must claim the income but your deductions are limited.

To retain the tax advantages of business treatment, establish your profit-making intentions early. Set up a business plan, a bank account, and a recordkeeping system. For an additional tax deduction this year, set up your home office.
Net operating losses from an established business also present AGI planning opportunities. If your business expenses exceeded your business income in 2013, you have until you file your 2013 federal income tax return to decide whether to apply the loss to a prior year or carry it forward into 2014.

By carrying the loss back you can generate a refund, boosting current year cash flow. However, depending on the type of business, your expected 2014 income, and your tax bracket, it may make more sense to use the loss to offset your 2014 income.

Document your expenses

An additional way to preserve business tax deductions is to have a strategy for obtaining written documentation supporting your expenses. Anautomobile mileage log is a typical case in point. The rules for substantiating vehicle expenses require you to keep a record, generally one made at or near the time you incur the expense or use the vehicle for business purposes.

Other documentation to put in place now includes a written policy for taking advantage of new “repair regulations.” These rules let you currently deduct certain purchases of assets that might otherwise have to be capitalized.

One more reason to start managing your 2014 AGI early in the year is thenet investment income tax. This 3.8% surtax generally applies when you have investment income, including, capital gains, interest, and dividends, and your AGI exceeds $200,000 ($250,000 when you’re married filing jointly).

Income from passive activities, such as businesses in which you own shares but do not “materially participate,” is also subject to the tax. Since material participation is typically measured on the basis of the time you spend working in the business during the year, a smart beginning-of-the-year tax strategy is to create a schedule for increasing your hours.

If you own more than one business and there’s simply not enough time to materially participate in all of them no matter how early you start, you may be able to “group” the different activities. Grouping lets you combine your hours to meet the material participation rules. If you grouped activities in a prior year, special circumstances may give you the opportunity to make changes in 2014.

Consider taxes in setting your 2014 investment strategy

As you investigate opportunities for managing your portfolio in 2014, remember to pause and plan for the effect of tax laws. Here are some important rules to consider.

Capital gain tax rates

For 2014, the tax rate you’ll pay on gains from sales of assets dependson your taxable income and how long you’ve owned the investment. Gains on assets owned a year or less are taxed at the same rate as your ordinary income.

The rate for qualified dividends and sales of most assets you own longer than a year can vary.

  • The rate is 0% when you’re married filing a joint return and your income is $73,800 or less ($36,900 when you’re single).
  • When your income is between $73,800 and $457,600 ($36,900 and $406,750 for single filers), the maximum rate is 15%.
  • A 20% rate applies when your taxable income is more than $457,600 ($406,750 when your filing status is single).
  • The 3.8% surtax applies to your income from capital gains, interest, and dividends when your adjusted gross income exceeds $250,000 ($200,000 when you’re filing single).

Analyze your options

Your overall financial goals should be complemented by planning strategies for tax-efficient investing. For example, purchasing stocks and other securities that offer long-term growth potential instead of current income from dividends can help reduce the amount of income subject to the net investment income tax. However, if you need cash flow from your investments, you might choose an alternative tax-saving strategy, such as adding tax-free municipal bonds to your portfolio. A mix of the two could be preferable if you’re subject to the alternative minimum tax.

Likewise, the same analysis applies to investment accounts. Let’s say you own bonds or other investments that generate taxable interest income. Holding these assets in a taxable account means that you will pay federal income tax based on your ordinary tax rate. Including them in tax-advantaged accounts such as IRAs might be a better idea because you could delay the tax bill until you begin making withdrawals.

We can help you create the best plan for 2014. So, please give us a call at (212)605-0276 to discuss the tax consequences of your investment decisions.

 

IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with Treasury Department regulations, we inform you that any U.S. federal tax advice contained is not intended or written to be used, and cannot be used for the purpose of (i) avoiding penalties that may be imposed under the U.S. Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein

Practical Year-end Tax Cutting Suggestions for Individuals

It’s not too late to consider tax moves that could reduce your 2013 taxes and get you in a better tax position for 2014. Here are some ideas:taxform 1040-resized-180

  • Be aware of higher tax rates. In 2013 the top tax rate has been increased to 39.6% for top bracket taxpayers (with taxable income over $400,000 for singles, $450,000 for married taxpayers). In addition, singles with income greater than $200,000 (or $250,000 for married taxpayers) will be subject to the new 3.8% surtax on net investment income. If you believe that you will be close to this limitation, consider making moves that will defer income into 2014.
  • Take advantage of tax-deferred accounts. All of the new tax rates and phase-outs are based upon adjusted gross income or taxable income. The most efficient way to reduce both of those items is to maximize contributions to tax-deferred retirement plans. If your employer offers such a plan, make maximum use of it (such as a deferred compensation plan). If not, see if you are eligible for your own deductible IRA. 
  • Consider a health savings account (HSA). Investing in an HSA gives you a current-year tax deduction, while providing a savings account to use to pay out-of-pocket medical expenses currently or in the future. An HSA is not a “use it or lose it” plan. Any funds in the plan can be used in future years. And be aware that you can fully fund your HSA up to April 15th of the following year.
  • Make charitable gifts from your IRA. Seniors age 70½ and older can make charitable contributions directly from their IRA. While this won’t be deductible, it can apply against your annual required minimum distribution (RMD), thereby lowering your adjusted gross income.

For guidance with your year-end tax planning, contact our office

IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with Treasury Department regulations, we inform you that any U.S. federal tax advice contained is not intended or written to be used, and cannot be used for the purpose of (i) avoiding penalties that may be imposed under the U.S. Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Practical Year-End Tax Ideas for Businesses and Self Employed

If you are self employed, a start up media entrepreneur or a business owner of any sort, it’s not too late to make moves to reduce your 2013 income and self employment taxes. Here are a couple ideas:

Tax planning

It is not too late to reduce your 2013 income taxes

  • Purchase business equipment. Up to $500,000 (scheduled to be reduced significantly to $25,000 in 2014) in business equipment purchases can be expensed this year, rather than being expensed over a number of years. Additionally, there is also a 50% bonus depreciation allowance (that will not be available in 2014) if your purchases exceed the $500,000 limit. 2013 might be the last year to maximize your equipment purchase deductions to such an extent.You may need the latest Mac or PC, for example. This is great benefit to any company with profits that can be offset or reduced.
  • Deduct health insurance. If you are self-employed, you are allowed to claim 100% of the amount paid for health insurance for yourself, your spouse, and your dependents as long as you follow certain conditions.
  • Consider credit card purchases. If you want to purchase equipment or supplies for your business before the end of the year, but you are cash-strapped, consider using your credit card. Your deduction occurs this year when the purchase is made, not next year when the credit card charges are paid. Many startups finance themselves through credit card purchases. Beware, this can add a level of risk to your startup.
  • Create a retirement plan. It’s not too late to create a retirement plan for yourself and your employees if you have them. The plans can be simple to set up and administer, such as a Simplified Employee Pension (SEP) plan. A 401(k) plan could be established even for a one-person business. While some of these plans must be established by the end of the year, most can be funded up to the extended due date of the tax return.
  • Use the new “streamlined” home-office rules. Ocassionally, self-employed taxpayers declined to claim the home-office deduction because it was so complicated to compute. For 2013, the deduction is streamlined, allowing for a deduction of $5 per square foot, up to a maximum of 300 square feet or $1,500. This is last on my list because $5 per square foot, although simple to understand is just a fraction of the cost per square foot in NYC and surrounding areas.

For guidance with year-end tax planning for your business, please contact our office.(516-280-8363)

IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with Treasury Department regulations, we inform you that any U.S. federal tax advice contained is not intended or written to be used, and cannot be used for the purpose of (i) avoiding penalties that may be imposed under the U.S. Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

 

 

A Quick Summary of New Tax Law Signed to Avoid Fiscal Cliff

The American Taxpayer Relief Act of 2012 was signed by the President on January 2, 2013. The following is a quick summary of some of the more important provisions.

Payroll taxes. The most visible tax change in the new tax law is the 2% increase in the payroll tax. Everyone who draws a paycheck or has self-employment income will pay more in 2013. If you have $40,000 in wages in 2013, you will pay an additional $800 of payroll taxes over what you paid in 2012 on the same amount of wages.

Tax rates. The new law keeps the income tax rates the same as they were in 2012 for most taxpayers and makes them permanent. The new 39.6% tax rate will apply to single taxpayers making over $400,000 and couples making over $450,000.
Itemized deductions. The law puts limitations on the itemized deductions and personal exemptions for singles making over $250,000 and married couples making over $300,000.

Long-term capital gains.  The long-term capital gains rate will be 20% for singles making over $400,000 and couples making over $450,000. The prior 15% and zero rates will continue to apply to those in the lower brackets as they did in 2012.

Tax-free distributions to charity. The tax-free distribution to charity from an IRA by a taxpayer age 70½ or older is extended through 2013. Special rules apply to December 2012 and January 2013 distributions if the transfer is made to the charity by January 31, 2013.

Education. A number of education tax incentives were extended or made permanent in the new tax law.

Child tax credit. The new law makes permanent the $1,000 child tax credit.

The alternative minimum tax (AMT) has been permanently patched with a 2012 exemption amount of $50,600 for unmarried taxpayers and $78,750 for married taxpayers. The exemption amount will be adjusted annually for inflation.

Depreciation. On the business front, the 50% bonus depreciation and the $500,000 business expensing option are extended through 2013. There are also numerous business tax incentives extended through 2013.

There is much more in the new tax law. Please contact us for a review of your tax considerations under the American Taxpayer Relief Act of 2012.

Obamacare: What is the Latest on Health Care Reform?

Taxes and government spending are going to be on the agenda in Washington during 2013. Where does that leave health care reform, the legislation passed in 2010 overhauling the health care system in this country?

Here’s a quick update that covers provisions in the health care legislation that went into effect prior to 2013 and those that, absent any changes made in the coming months, go into effect in 2013 and thereafter.

The following provisions have already taken effect:

  • A 10% tax is assessed on indoor tanning services.
  • Small businesses with fewer than 25 full-time employees may qualify for a tax credit for the cost of purchasing health insurance for their employees.
  • Children can remain on their parents’ insurance policies up to age 26. Private lending for student loans is replaced with loans directly from the federal government, cutting loan fees.
  • A 50% discount on brand-name drugs for those with Medicare drug coverage helps to offset costs  in the “donut hole.”
  • Over-the-counter medications can no longer be paid for with funds in health savings accounts (HSAs), flexible spending accounts (FSAs), and health reimbursement accounts (HRAs).
  • The additional tax on nonqualified distributions from health savings accounts (HSAs) increases from 10% to 20%.

The provisions that will take effect in 2013 include the following:

FSA limits

  • The amount that can be contributed to a health flexible spending account (FSA) is limited to $2,500 per year, indexed annually for inflation.

Medical expense deduction

  • The 7.5% income threshold for deducting unreimbursed medical expenses increases to 10% for those under age 65. Those 65 and older may continue to take an itemized deduction for medical expenses exceeding 7.5% of adjusted gross income through the year 2016.

Executive pay limit

  • The compensation deduction for certain health insurance companies is limited to $500,000 per year for high-level executives.

Medicare tax increase

  • The payroll Medicare tax will increase from 1.45% of wages to 2.35% on amounts above $200,000 earned by individuals and above $250,000 earned by married couples filing joint returns. The income threshold levels are not indexed for inflation.
  • A new 3.8% Medicare tax will be imposed on unearned income for single taxpayers with income over $200,000 and married couples with income over $250,000. Examples of unearned income: interest, dividends, royalties, rental income.

Medical device tax

  • A 2.3% excise tax is imposed on the sale of certain medical devices.

Provisions scheduled to take effect in years after 2013 include the following:

Coverage required starting in 2014

  • Individuals who are not covered by Medicare, Medicaid, or other government health insurance are generally required to maintain health insurance coverage or pay a penalty. Penalties are calculated using a percentage of the taxpayer’s income or a flat dollar amount. Subsidies and tax credits are available to help lower-income taxpayers pay for coverage.
  • Health insurance exchanges are established by states to enable people to comparison shop for coverage.
  • Large employers generally must provide coverage for employees or face penalties.
  • Tax credits increase from 35% to a maximum 50% of premiums paid by qualifying small businesses that provide coverage for their workers. The credit available to nonprofit employers increases from 25% to 35%.

Health industry fee in 2014

  • An annual fee is assessed on the health insurance industry, starting at $8 billion in 2014 and increasing over the following years.

Tax on “Cadillac plans” in 2018

  • Insurance companies will be assessed a 40% excise tax on health insurance plans with annual premiums exceeding $10,200 for individual coverage and $27,500 for family coverage. An increase in the threshold amount is allowed for retired persons who are age 55 or older (an additional $1,650 for single coverage and $3,450 for family coverage). These increased thresholds also apply for plans that cover those engaged in high-risk occupations.

Certain provisions in the original health reform legislation have already been changed or repealed. For example, the law originally required Form 1099 reporting for payments over $600 made to corporations. That requirement has been repealed, and reporting is again generally required only for payments over $600 made to unincorporated businesses.

Congress may amend or repeal provisions in the health care reform law, either before their scheduled effective date or retroactively. Or the law may survive largely intact. Clearly, the massive law will affect every taxpayer. For guidance in your individual and business tax planning under the often-complicated health reform legislation, contact our office at 516-280-8363.

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Ten Tax Moves to Consider Before Year End

Hear those holiday bells? Soon they’ll be ringing in the new year. But before the clock strikes 2013, you have opportunities to reduce your 2012 federal income tax bill.

Here’s a grab-bag of suggestions to consider. In considering these potential savings for 2012, consider the currently scheduled end of the Bush tax cuts and how they will impact you.

We can help. If you have any questions or comments, please call Jack Craven at 516-280-8363  or email: Jack@JFCravenCPA.com.

Regards,

Jack Craven, CPA

1. Plan for the AMT. The annual exemption may change, but the usual triggers – items that can create alternative minimum tax liability such as certain large deductions – are the same.

2. Education incentives. Pre-paying qualifying expenses for the first semester of 2013 can get you a larger credit or deduction this year.
3. Family gifts. Take advantage of the expiring $5.12 million lifetime gift exclusion by sharing the wealth – and the tax burden – with lower-bracket family members.
4. Deferred plans. Maximize contributions to retirement plans such as your 401(k) or IRA, and fund other tax-favored accounts, such as health savings accounts.
5. Charitable contributions. Gifts to qualified charities made on your credit card by December 31 qualify for a deduction this year, even though you’ll receive the credit card statement in January.
6. Itemized vs. standard deductionShift expenses such as property taxes between years to “bunch” deductions and get the most tax benefit.
7. Disaster relief. Check for a potential refund, and consider amending your 2011 return to claim your loss if you live in a federally declared disaster area.
8. Investment cost basis. Understand your cost basis choices before capturing capital gains or losses, especially when selling mutual funds.
9. Temporary depreciation deductions. Assets purchased for your business or rental property before year-end may qualify for accelerated depreciation methods that are scheduled to expire on December 31.
10. Kiddie tax. Instead of transferring assets to your children to save for future education expenses, consider contributing to a 529 plan, which can limit exposure to “kiddie tax” on unearned income.

 

Contact us to discuss these and other tax-saving and planning ideas suited to your particular situation.