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WendroffCPA Tax Planning Services
As we near the end of another tumultuous year, this is an important time to review your tax situation with the objective of identifying strategies you can make before year-end to minimize your tax bill.
Planning will be challenging this year with several significant changes in the tax code as well as the expiration of the Bush Tax Cuts. At the end of 2010, most of the tax reducing provisions in the Economic Growth and Tax Relief Reconciliation Act of 2001 will sunset or expire. Only those provisions extended or made permanent by later tax legislation remain effective in 2011 and beyond. At the point of major tax change, there are always opportunities to take advantage of and pitfalls to avoid if one wants to keep their tax liability as low as possible.
Here are some tax strategies to consider:
Individual:
Consider giving winning shares to your low-earning children instead of cash – If they earn under $34,000, their long-term capital gains rate for 2010 is 0 percent. Instead of selling mutual fund shares to give your child cash to buy a house or car, give him/her the shares and let him cash them in. This only works with children old enough to be emancipated from the “kiddie tax,” which means they have to be 19 or older and out of school, or 24 or older if they are still in school
Consider taking stock losses – When you sell a stock (or mutual fund shares) that you’ve held for more than a year for a loss, you can deduct that loss from your capital gains. You can deduct up to $3,000 of that net capital loss against 2010 ordinary income from salary, self-employment income or interest income. (The net capital loss deduction limit is only $1,500 if you used married filing separate status.) Any excess net capital loss is carried forward to 2011 and beyond and will generate future tax savings.
Non-Cash Charitable Deductions –You can deduct the fair market value of your non cash charitable contributions and they can add up quickly. Some things to remember:
• When making the donation you must get and keep a receipt from the charitable organization showing: 1) the name of the charitable organization, 2) the date and location of the charitable contribution, and 3) a reasonably detailed description of the property.
• Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete section b of form 8283, which requires an appraisal by a qualified appraiser.
Business:
Consider acquiring needed business assets now -Taxpayers, except trusts and estates, can elect to expense, up to a specified maximum amount, the cost of certain property purchased and placed in service during the tax year. The expense can be made only for qualifying personal property used actively in the business. The max amount that can be expensed is $250,000 for 2010, 2009, or 2008. After 2010, the amount drops to $25,000.
Also consider buying this year if you are looking at a new business vehicle purchase – The maximum deduction for cars acquired and placed in use before Dec. 31 is $11,060. After that, the cap falls to about $3,000. And if you buy a new SUV with a loaded weight of over 6,000 pounds and place it into service in 2010, there are a bevy of tax breaks: Up to $25,000 of the cost can be expensed, half the balance is eligible for bonus depreciation and 20% of the remaining cost is recovered through normal depreciation.
Wendroff & Associates would like to offer our tax planning services to develop year-end and long-term tax planning strategies. The previous strategies are a few of the areas where we can help clients plan. Tax planning includes working with you to identify tax saving strategies most suited to your individual situation and determining your estimated tax liability to allow you to properly plan for the future. Our firm will be reserving the weeks of November 8 through December 17 specifically for client tax planning. Tax planning generally takes the firm one to two hours and the fee is about $250. Typically the money saved through reducing your tax liability is greater than the fee.
We will be following up with you within the next two weeks to discuss your personal tax situation and possible tax planning. If you would like to set up an appointment to review your tax situation, please contact Darren Wendroff at 703-436-1461 or darren@wendroffcpa.com.
