2011 Q4 Year-End Family Tax Planning

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 Q3 | Choosing the Right 401(k)

2011 Q3 | Choosing the Right 401(k)

Many companies offer employees a choice between two 401(k) plans. The version with which you’re probably most familiar As before, you can choose to defer some salary and defer the income tax as well. You’ll also defer the tax on any investment earnings. However, when you withdraw tax-deferred earnings and tax-deferred investment income, you’ll owe income tax. You’ll probably owe a 10% penalty on withdrawals before age 59 1/2, too. Another option you may have is a Roth 401(k). With this account, you’re not deferring income tax, so you’re contributing after-tax dollars. Again, you wont owe tax on any investment income inside the plan. After you’ve had a Roth 401(k) for 5 years and after age 59 1/2, all withdrawals

2011 Q3 | Avoid Higher Medicare Premiums

2011 Q3 | Avoid Higher Medicare Premiums

For several years, upper-income Medicare enrollees have had to pay higher-than-standard premiums for Medicare Part B, which covers doctors’ bills and other outpatient charges. Starting in 2011, those same seniors also owe elevated premiums for Part D, which covers prescription drugs. These added charges use income “cliffs,” meaning that you pay the full amount if you go over the threshold by even $1. Many Medicare enrollees pay $96.40 a month for Part B, and some others pay $110.50 or $115.40 a month. (This depends on when they enrolled in Part B and whether the premium is deducted from their Social Security checks.) However, you will pay much more this year if your modified adjusted gross income (MAGI) exceeds certain levels.

2011 Q3 | With Savings Bonds, Prepaying Tax May Be a Good Tactic

2011 Q3 | With Savings Bonds, Prepaying Tax May Be a Good Tactic

U.S. savings bonds can be good investments, especially if purchased for young children. They’re issued by the federal government, so bond holders don’t have to worry about a default. Yields are comparable to the yields on bank accounts. They’re fairly liquid: owners can cash in savings bonds one year after the purchase and can redeem these bonds with no loss of interest after five years. (If you redeem savings bonds within five years, you’ll lose the interest for the latest three months.) Taxes, too Owners of savings bonds also receive tax advantages. The interest is exempt from state and local income tax. Savings bonds are issued by the U.S. Treasury Department so they enjoy this tax treatment, along with all

2011 Q3 | Use Appreciated Assets for Charitable Donations

2011 Q3 | Use Appreciated Assets for Charitable Donations

Writing a check is the easiest way to make charitable contributions. However, donating appreciated assets can be more tax-efficient. That’s true if the donated assets have been held longer than one year and, thus, would qualify for long-term capital gains tax treatment on a sale. Example: Mark Parker wants to donate $5,000 to a local animal shelter. If he writes a check for $5,000, he’ll get a $5,000 tax deduction. Mark’s cost for this deduction is $5,000, after-tax. Instead, Mark goes through his portfolio and finds a stock he bought in 2009 for $3,000 and, thus, would qualify for long-term capital gains treatment. That stock now sells for $5,000. Mark decides to donate the stock to the animal shelter. With

2011 Q3 | State Taxes Can Crimp Your Cash Flow

2011 Q3 | State Taxes Can Crimp Your Cash Flow

If your company does business solely in one state, it probably owes tax to that state, as well as to the federal government. Many companies, however, operate across state lines, and therefore, may owe tax to more than one state. In the current economic slowdown, some states are endeavoring to address tax shortfalls by aggressively seeking more tax from companies based in other states. Types of tax State taxes come in several categories. The most common include • income taxes. If your company has net income from operations within a state, that state may tax those profits. • sales taxes. These taxes generally are imposed on the retail sale of goods (that is, when goods are sold to an end