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Year End Tax Planning
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    We are excited to help you with year end tax savings ideas. There are many changes and lots of potential savings. Please read more below and give us a call at 513-777-4533, or click the button below.  
     
   
Year End Tax Planning
     
    Year-end tax planning could be especially productive this year because timely action can nail down a host of tax breaks that won't be around next year unless Congress acts to extend them. Call us and we can go over them with you.
   
   
TAX SAVINGS FOR HIGH INCOME EARNERS
    High-income-earners have other factors to keep in mind when mapping out year-end plans. Many observers expect top tax rates on ordinary income to increase after 2010, making long-term deferral of income less appealing. Long-term capital gains rates could go up as well, so it may pay for some to take large profits this year instead of a few years down the road. On the other hand, the solid good news high-income-earners have to look forward to next year is that there no longer will be an income based reduction of most itemized deductions, nor will there be a phaseout of personal exemptions. Additionally, traditional IRA to Roth IRA conversions will be allowed regardless of a taxpayer's income.
   
   
CHECKLIST OF TAX SAVINGS IDEAS-INDIVIDUAL TAX PAYER
   
  • Increase the amount you set aside for next year in your employer's health flexible spending account (FSA) if you set aside too little for this year. Don't forget you can set aside amounts to get tax-free reimbursements for over-the-counter drugs, such as aspirin and antacids.
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  • If you become eligible to make health savings account (HSA) contributions in December of this year, you can make a full year's worth of deductible HSA contributions for 2009.
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  • Realize losses on stock while substantially preserving your investment position. There are several ways this can be done. For example, you can sell the original holding, then buy back the same securities at least 31 days later. It may be advisable for us to meet to discuss year-end trades you should consider making.
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  • Postpone income until 2010 and accelerate deductions into 2009 to lower your 2009 tax bill. This strategy may enable you to claim larger deductions, credits, and other tax breaks for 2009 that are phased out over varying levels of adjusted gross income (AGI). These include IRA and Roth IRA contributions, conversions of regular IRAs to Roth IRAs, child credits, higher education tax credits, the above-the-line deduction for higher-education expenses, and deductions for student loan interest. Postponing income also is desirable for those taxpayers who anticipate being in a lower tax bracket next year due to changed financial circumstances. Note, however, that in some cases, it may pay to actually accelerate income into 2009. For example, this may be the case where a person's marginal tax rate is much lower this year than it will be next year.
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  • If you believe a Roth IRA is better than a traditional IRA, and want to remain in the market for the long term, consider converting traditional-IRA money invested in beaten-down stocks (or mutual funds) into Roth IRAs if eligible to do so. Keep in mind, however, that such a conversion will increase your adjusted gross income for 2009.
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  • It may be advantageous to try to arrange with your employer to defer a bonus that may be coming your way until 2010.
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  • If you own an interest in a partnership or S corporation you may need to increase your basis in the entity so you can deduct a loss from it for this year.
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  • Consider using a credit card to prepay expenses that can generate deductions for this year.
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  • If you expect to owe state and local income taxes when you file your return next year, ask your employer to increase withholding of state and local taxes (or pay estimated tax payments of state and local taxes) before year-end to pull the deduction of those taxes into 2010.
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  • Those facing a penalty for underpayment of federal estimated tax may be able to eliminate or reduce it by increasing their withholding.
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  • Accelerate big ticket purchases into 2009 in order to assure a deduction for sales taxes on the purchase if you will elect to claim a state and local general sales tax deduction instead of a state and local income tax deduction.
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  • If you are planning to buy a car, do so before year-end in order to nail down a deduction for state sales tax and excise tax on the purchase.
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  • You may be able to save taxes this year and next by applying a bunching strategy to “miscellaneous” itemized deductions, medical expenses and other itemized deductions.
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  • Estimate the effect of any year-end planning moves on the alternative minimum tax (AMT).
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  • Make energy saving improvements to your home, such as putting in extra insulation or installing energy saving windows, and qualify for a tax credit. Additional, substantial tax credits are available for installing energy generating equipment (such as solar electric panels or solar hot water heaters) to your home.
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  • You may want to pay contested taxes to be able to deduct them this year while continuing to contest them next year.
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  • You may want to settle an insurance or damage claim in order to maximize your casualty loss deduction this year.
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  • If you are self-employed and haven't done so yet, set up a self-employed retirement plan.
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  • First time home purchases must be made before Dec. 1, 2009, in order to qualify for an up-to-$8,000 credit.
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  • You can save gift and estate taxes by making gifts sheltered by the annual gift tax exclusion before the end of the year. You can give $13,000 in 2009 to an unlimited number of individuals but you can't carry over unused exclusions from one year to the next.
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  • If you are age 70 1/2 or older, own IRAs (or Roth IRAs), and are thinking of making a charitable gift, consider arranging for the gift to be made directly by the IRA trustee. Such a transfer, if made before year-end, can achieve important tax savings.
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  • If you are age 70 1/2 or older and took a distribution from a retirement plan or IRA earlier this year, you may be able to avoid tax on the payout by rolling it over into an eligible retirement plan (including an IRA) before Dec. 1, 2009.
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  • If you are receiving Social Security benefits, there are a number of steps you can take to reduce or eliminate tax on your benefits.
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  • Consider extending your subscriptions to professional journals, paying union or professional dues, enrolling in (and paying tuition for) job-related courses, etc., to bunch into 2009 miscellaneous itemized deductions subject to the 2%-of-AGI floor.
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  • Depending on your particular situation, you may also want to consider deferring a debt-cancellation event until 2010, electing to deduct investment interest against capital gains, and disposing of a passive activity to allow you to deduct suspended losses.
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    TAX SAVINGS- BUSINESSES
        Businesses should consider making expenditures that qualify for the up to $250,000 business property expensing option for assets bought and placed in service this year; the maximum expensing amount will drop to $134,000 for assets bought and placed in service next year (higher expensing amounts apply to certain specialized assets). Businesses also should consider making expenditures that qualify for 50% bonus first year depreciation if bought and placed in service this year. This bonus writeoff generally won't be available next year.
       
     
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