Our 1st Quarter News Letter is now available. Please click on the link to view. 1st Quarter 2012 Client Tax Letter
2011 Q4 A Year of Uncertainty?
Officially, year-end tax planning is fairly straightforward in 2011. At year-end 2010, Congress extended many of the income tax laws that were in place at the time. Some laws were changed, especially in the estate planning area. For the most part, the tax law passed at the end of last year is effective for two years: 2011 and 2012. Therefore, you may expect to plan for year-end 2011 and for 2012 with some certainty. As this issue is written, however, the news from Washington is far from certain. President Obama and Congressional leaders are attempting to resolve federal budget and debt issues. Tax changes are possible, and such changes may affect year-end planning in 2011. Our office will keep you
2011 Q4 Year-End Tax Planning for Investors
Stocks performed reasonably well for much of 2011 but fell precipitously after the downgrading of the United States’ credit rating. As of this writing, the investment outlook for 2011 is quite uncertain. Despite that fact, there are things you can do with your portfolio by year-end to reduce the tax you’ll owe for 2011. Start by reviewing Schedule D of the federal income tax return you filed for 2010. See if you are carrying over any net capital losses from previous years. The next step is to tally your trading activity for 2011 so far. You can determine if you are in a net capital gain or loss position for the year to date. Example 1: Jane Collins is carrying
2011 Q4 Estate and Gift Tax
❖The federal and estate gift tax exemptions are each set at $5 million for 2011 and 2012. ❖This year, the federal gift tax exclusion is $13,000. Excess gifts have gift tax consequences. ❖Suppose that Marge Jones, a widow, gives $300,000 to her daughter in 2011. The first $13,000 is covered by the annual exclusion. ❖The remaining $287,000 reduces Marge’s estate tax exemption. ❖Assume that Marge dies in 2012 and has made no other gifts over the annual exclusion amount. ❖In this scenario, Marge’s estate would have an estate tax exemption of $4,713,000: $5,000,000 minus $287,000.
2011 Q4 Year-End Family Tax Planning
When you turn your attention to year-end tax planning, you probably focus on your own situation as a single taxpayer or as a married individual who will file a joint tax return. Broadening your horizons, though, may pay off. If you have relatives in a low tax bracket, some strategies can permit you to take advantage of their low tax rates. The outcome might be lower taxes and more money for you and your loved ones to spend or invest. Coping with the kiddie tax You may believe that shifting income from parent to student is a taxefficient way to build an education fund. You might, for instance, give taxable bonds to your children so they can receive interest in
2011 Q4 Year-End Estate Tax Planning
As mentioned previously in this issue, decedents have a $5 million exemption from the federal estate tax for deaths in 2011 and 2012. Many states also impose tax on estates or estate beneficiaries. Depending on the state, people with a net worth of $1 million or more may leave their heirs with tax to pay. In addition, future legislation might reduce the federal estate tax exemption. As a result, you may want to take some actions by year-end 2011 that can reduce your heirs’ exposure to future estate tax. Embracing the exclusion Do you have more wealth than the amount you’re likely to need for yourself and perhaps for a surviving spouse? If that’s the case, use your annual gift