Tax Tips

• See annual limits worksheet for deduction caps.

New Home Buyer Credit

• First time homebuyers and certain existing homeowners can qualify for a tax credit if a personal residence is purchased prior to May 1, 2010 and closed prior to July 1, 2010.

Stock Market:

• In a period of declining stock prices you may be able to reduce your taxable income by moving out of unfavorable investments and shift to investments you are more comfortable with. Remember a tax loss only occurs upon the sale of the security. Recognized stock losses are used to offset capital gains. Excess capital losses can be used to offset up to $3,000 of ordinary income. If the loss exceeds $3,000 the balance of the loss is carried forward to future years. Because a capital loss is used too offset ordinary income it is advantageous to recognize a capital loss in one year and defer long term gains to the following year.
• You can write off the cost of a worthless security as a capital loss. In order to take the loss you must have evidence that the security is worthless, company has liquidated or gone bankrupt.

General Tips:

• Qualified Tuition Programs (529b plans) – earnings from these accounts are tax-free. This represents an opportunity to accumulate funds for children and grandchildren's college education tax-free. Gifts to 529b accounts can exceed the regular annual gift maximum of $13,000. This represents a manner to reduce potential estate taxes.
• The IRS requires a Social Security number for all dependents. Without it the IRS can deny personal exemption, child care or dependent care credit.
• Premiums paid or accrued for qualified mortgage insurance are deductible as qualified residence interest. The insurance must be carried on acquisition indebtedness for a qualified residence. A "qualified residence" is the principal residence and one other residence that is not treated as business property.
• IRA and Keogh Distributions. Minimum distributions are generally required when you are seventy and one-half. The first distribution may be delayed until April 1 of the year following the year you reach 70 and one-half. In subsequent years the distribution must be made an annual basis. Careful planning can determine the most advantageous year to take the first distribution.

IRA Frequently Asked Questions:

• Roth IRA's are non deductible but grow tax free.
• Roth IRA's can used in college funding planning.
• Traditional IRA's are deductible but distributions are taxable.

Business Tax Tips

• Utilize Section 179,expenseing of business asset purchases, $250,000 in 2009 and $134,000 in 2010.
• Start-up costs- If you launched your business in 2007 and you incurred expenses before the business actually began operating (start-up costs), you may be able to deduct these expenses. As long as the business is up and running by the end of 2007, you can elect to currently deduct up to $5,000 of start-up expenses. Once start-up costs exceed $50,000 the $5,000 limit is reduced dollar for dollar. The remainder of the costs must be deducted ratably over a 180-month period.
• The Disabled Access Tax Credit allows $ 5000 of expenditures annually for purchase of equipment to make your building more accessible to the handicapped.
• Section 190 expenditures; immediate write-off of the first $15,000 of expenditures incurred to remove architectural or transportation barriers to provide services to the handicapped or elderly.