Year-End Tax Planning (2009)

Year-End Tax Planning   As the end of the year approaches, you are once again reminded of the unique opportunities in store to reduce your taxes. Planning includes traditional considerations such as deferring income and accelerating deductions, timing of capital gains to match capital losses, and making last-minute contributions to tax deferred accounts such as retirement accounts. Other considerations: Making charitable contributions with appreciated stock, since you receive a deduction for the fair market value of the stock and the gain goes untaxed, Paying your winter real estate tax and your fourth quarter estimated state and local income tax by December 31 if you can itemize, Minimizing taxable income to reduce your taxable social security benefits, Paying expenses using a credit card to accelerate deductions without the need for immediate cash. (Caution: Use extreme care with this strategy and only pay expenses that you can pay off with your next billing statement), Bunching medical expenses and/or miscellaneous itemized deductions to maximize use in comparison to the standard deduction. Additional Opportunities: Following are some new and continuing items you can expect for this year (and in some cases, for future years as well): 2009 IRA contributions limited to $5,000, plus $1,000 catch-up for 50 years and older, For 2009 and 2010 Long-Term Capital Gains and Qualified Dividends will be tax-free for those in the 15% tax bracket. The standard mileage rate for business mileage will be 50? per mile for 2010. The mileage rate for medical and moving will become 16.5? per mile. The rate for charitable mileage remains at 14? per mile, Energy Credits: Back for 2009 and 2010 is the credit for energy-saving home improvements; 30% credit, up to $1,500. This applies to certain water heaters, high-efficiency furnaces, AC, windows, etc. You can also earn a 30% credit for installing residential energy efficient property such as solar water heating equipment, geothermal heat pumps, wind turbines, etc. Plus, Michigan has added new credits to the state return for 2009 thru 2011: Refundable credit for purchase and installation cost of a qualified home improvement or an energy efficient appliance. These are broken down into five categories: (1) Insulation (2) Furnace (3) Water Heater (4) Windows and (5) Refrigerator, Clothes Washer, and Dishwasher. Michigan also has a non-refundable credit for the energy surcharge on your electric bill. This equals a $9 credit, The gift tax exclusion for 2009 and 2010 is $13,000 per donee, The Estate Tax Exemption Equivalent for 2009 became $3.5 million, Charitable Contributions: Retirees over the age 70? can contribute funds directly from their IRA to a public charity. This provision was extended through 2009, Remember that the Required Minimum Distributions for IRA and retirement accounts have been suspended for 2009. This includes inherited IRA?s as well, The private mortgage insurance deduction is available through 2010, First Time Home Buyers Credit: has been expanded to a maximum $8,000 credit, non-recaptured unless the home is no longer the primary residence within the first 36 months. Available for purchases through April 30, 2010, Replacement Home Purchase: Up to $6,500 credit. Available only to those who have maintained the same principal residence for any five consecutive year period during the prior eight years. Available for primary residence purchases from November 7, 2009 thru April 30, 2010, Property Tax Deduction for non-itemizers: limited to lesser of tax paid or $1,000 ($500 single). Added to standard deduction, In 2010 there will be no AGI limit for those who convert their traditional IRA into a ROTH IRA. Also, the income on conversion can be taxed in the year converted or averaged over two years (2011 and 2012), The Hope Credit becomes the American Opportunity Credit and comes with enhancements, For 2009 the first $2,400 of unemployment benefits are non-taxable, You can deduct the sales tax on new vehicles purchased through the end of this year whether you itemize or use the Standard Deduction An Invitation This letter is only intended to be a cursory review of some of the current tax law changes. For more detailed review of changes that may affect you, please call this office. If appropriate, we can even make an appointment and talk further about how we can draft a year-end tax plan customized to meet your specific needs. Other Services In addition to individual tax preparation, we offer the following services: Trust and Estate (fiduciary) income tax preparation, Estate Planning, Federal Estate Tax preparation, Small business accounting, Corporate and Partnership tax preparation, Employer payroll reports, e-file: federal and state Referrals: We appreciate your referrals very much. Therefore, we are continuing our rewards program for any referrals resulting in new clients for our office. Please make sure you notify us of any new clients you send our way. Rates for 2010: As always our fee is based upon an hourly rate. For 2010 our rates will remain the same as the past two years: - Trust & Estate work $110/hr. - 1040 prep & other work $80/hr.

Unparalleled customer service is the cornerstone of our business