As the end of 2011 approaches, there are many actions to consider that could reduce your 2011 taxes. Year-end planning is particularly challenging this year given the growing national debate over comprehensive tax reform, the rapid pace of recent tax law changes, and the extensive list of current tax breaks that are scheduled to expire at the end of 2011. Regardless of these looming uncertainties, there are many “time-tested” year-end tax savings techniques that you should consider for 2011. We are sending you this letter to remind you of the traditional year-end tax planning strategies that help lower your taxable income and postpone the payment of your taxes to later years. In this letter we also help you navigate
2011 Year End Corporate and Non-Corporate Businesses
We have reached that time of year when businesses need to consider year-end tax planning. This year is particularly challenging because Congress has enacted a series of tax breaks which are generally scheduled to expire after 2011. For example, unless Congress acts to extend these provisions, the following business tax breaks will generally expire (or become less beneficial) after 2011: 100% §168 bonus depreciation; larger and expanded §179 deduction; 100% gain exclusion for “qualified small business stock;” and relaxation of the S corporation built‑in gains tax rules. There have also been recent IRS releases and Court cases that address: the ability of self-employed individuals, partners, and S corporation shareholders to deduct health insurance premiums (including Medicare premiums); whether compensation
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 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