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April 5, 2010

Investment Portfolio Losses

Capital gains on investments held for one year or less are short-term capital gains taxed at ordinary income tax rates. For investments held over one year, the maximum long-term capital gains tax rate in 2010 is 15% (0% for taxpayers in the 10% or 15% tax bracket). While the 15% rate is significantly below the maximum ordinary income tax rate of 35%, it still takes a significant chunk out of your investment portfolio.

Continue reading "Investment Portfolio Losses" »

August 15, 2009

Develop a Tax-Planning Mentality

Many people confuse tax planning with tax preparation and only think about the subject when preparing their annual tax return. However, there is little you can do to actually lower your bill when preparing your return. If your goal is to reduce income taxes, you need to be aware of tax-planning opportunities throughout the year.

Continue reading "Develop a Tax-Planning Mentality" »

August 6, 2009

Reduced Planning Opportunities for Vacation Homes

In the past, it was possible to turn a vacation home or rental home into your principal residence so that you could later sell it and exclude gains on the sale from income. If you were planning on such a strategy, be aware that the tax rules recently changed.

Continue reading "Reduced Planning Opportunities for Vacation Homes" »

June 23, 2009

Taxes and Your Investments

Ordinary income taxes on short-term capital gains and interest income can go as high as 35%, while long-term capital gains and qualified dividend income are taxed at rates not exceeding 15% (0% if you are in the 10% or 15% tax bracket). One way to help maintain your portfolio's growth potential is to invest in a tax-efficient manner. Below are seven suggestions you may want to consider:

Continue reading "Taxes and Your Investments" »

May 1, 2009

Rolling Over an IRA to a 401(k) Plan

If your 401(k) plan permits, you can roll over balances from a traditional individual retirement account (IRA), but not a Roth IRA, to a 401(k) plan. To qualify as a tax-free rollover, the balance must be rolled over to a 401(k) plan for the same person who owns the IRA, the balance must be rolled over within 60 days, and the maximum amount rolled over cannot exceed amounts that would be includible in gross income if not rolled over. Thus, contributions to nondeductible IRAs cannot be rolled over, but contributions to deductible IRAs and all earnings in both types of IRAs can be rolled over. Also, any required minimum distributions for the year cannot be rolled over.

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March 31, 2009

Tax Planning as You Age

While tax planning should be a consideration through all phases of life, the nature of that planning changes as you approach retirement age. During your working years, your primary tax-planning objectives are to reduce your current income taxes while saving for retirement. After decades of accumulating money, you now need to ensure you withdraw and manage that money properly. Here are five tips you should consider:

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March 20, 2009

Get to Know the Three Types of IRS Audits

The Internal Revenue Service (IRS) is not exactly the favorite government agency of many Americans. This can only be expected given that everyone thinks differently on how best to compute and pay their taxes. Nonetheless, you should have a working knowledge of the tax system to be prepared in case you get audited. It is reported that around 80% of American tax payers are subjected to an IRS audit at least once in their lifetime.

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January 16, 2009

For the IRS, a Season of Kindness

The IRS is promising to be kinder in 2009. They say that agents will have more freedom to suspend collections in those cases where people who owe back taxes are unable to pay. That doesn't mean they won't have to pay eventually, just that the IRS won't keep harassing you if you don't have the ability to repay what you owe at the present time. The guidelines issued to agents include cases where the taxpayer is facing serious illness, relies solely on social security or welfare, or have lost their jobs.

Continue reading "For the IRS, a Season of Kindness" »

January 11, 2009

Gifting Considerations

Deciding whether you should give a significant asset to an heir during your life or after your death has typically involved weighing potential estate tax costs against capital gains taxes that would be due when the asset is sold.

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November 5, 2008

Tax Consequences of Outstanding Debt Exceeding Home Values

When the value of a home is less than the outstanding debt, the homeowner's options are dismal. Foreclosure, deeds in lieu of foreclosure, and short sales all result in the loss of the home with serious credit consequences for the homeowner. In addition, if the lender forgives part of the loan, the homeowner walks away with nothing, and there may still be the following tax consequences:

Continue reading "Tax Consequences of Outstanding Debt Exceeding Home Values" »

October 15, 2008

Year-End Tax Planning Strategies

As year-end rapidly approaches, it's a good time to take a look at your tax situation. You still have time to take action that could reduce your income tax liability for 2008. Once you have an idea of where you stand for 2008 with your income tax situation, you can evaluate some tax planning strategies that may reduce your income tax burden in 2008. Here are some tips to consider:

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October 6, 2008

Tax Consequences Between a Roth 40l(k) Plan and IRA versus Traditional Plans

Should you pay income taxes now, so you can withdraw funds after retirement tax free? Or are you better off delaying income taxes until after retirement? This is the basic decision when choosing between a traditional deductible individual retirement account (IRA) and a Roth IRA, or between a 401(k) plan and a Roth 401(k) plan. With the Roth options, you are paying taxes now so you can take qualified distributions income-tax free. With the traditional IRA and 401(k) plan, you are delaying taxes until distributions are taken.

Continue reading "Tax Consequences Between a Roth 40l(k) Plan and IRA versus Traditional Plans" »

May 14, 2008

Asset Transfers by Nonspouse Beneficiaries

The Pension Protection Act of 2006 contained a provision allowing nonspouse beneficiaries to roll over funds from an employer pension plan to an inherited individual retirement account (IRA), starting in 2007. This was viewed as a significant development for nonspouse beneficiaries, who would be able to extend distributions from employer pension plans over their life expectancies rather than the typical five-year period imposed by most plans.

Continue reading "Asset Transfers by Nonspouse Beneficiaries" »

May 7, 2008

Withdrawals From Your IRA

The tax laws regarding withdrawals from individual retirement accounts (IRAs) are complex. To avoid unnecessary penalties and to ensure you withdraw the funds efficiently, here are the basics:

Continue reading "Withdrawals From Your IRA" »

April 14, 2008

Taking Advantage of the 0% Capital Gains Tax

In 2008 to 2010, the capital gains tax rate for individuals in the 10% or 15% tax bracket will be 0% (down from 5% previously). After 2010, the rates will revert to pre-2001 rates, unless further legislation is passed. Who will benefit from this reduction?

Continue reading "Taking Advantage of the 0% Capital Gains Tax" »

January 16, 2008

Rapid Refund Income Tax Loans: Are They Worth the High Fees?

With tax season right around the corner, many income tax preparation companies are getting ready for the busy season of filing taxes to begin. Well known companies like Jackson Hewitt and H & R Block have been around for years, and compared to small, privately owned tax preparers, they are unique. One thing that makes these types of companies unique is the fact that they offer quicker ways for you to receive your money.

Continue reading "Rapid Refund Income Tax Loans: Are They Worth the High Fees?" »

October 8, 2007

"Kiddie Tax" Age Gets Raised

The Small Business and Work Opportunity Tax Act of 2007, signed into law on May 25, 2007, raised the age limit for application of the "kiddie tax" to all children under age 19 (previously age 18) and to students under age 24, effective for tax years beginning after May 25, 2007. Just last year, the "kiddie tax" age limit was raised from under age 14 to under age 18. There is an exception to these new age limits. If the earned income of an individual over age 17 exceeds half of his/her support, the "kiddie tax" does not apply. Scholarships are not considered a part of this test.

Continue reading ""Kiddie Tax" Age Gets Raised" »

September 14, 2007

Selling Your Home at a Loss

With the real estate market slowing, more taxpayers may find themselves in a situation where the sale of their home results in a tax loss or their net sale’s price is less than the amount of their outstanding mortgage.

Continue reading "Selling Your Home at a Loss" »

September 12, 2007

Undoing a Roth Conversion

When converting a traditional individual retirement account (IRA) to a Roth IRA, transferred amounts must be included in income if taxable when withdrawn (e.g., contributions and earnings in traditional IRAs and earnings in nondeductible IRAs), but are exempt from the 10% federal income tax penalty. Your adjusted gross income (AGI) cannot exceed $100,000 in the conversion year, excluding any converted amounts.

Continue reading "Undoing a Roth Conversion" »

September 10, 2007

Figuring Out Your Real Marginal Tax Rate

If you answer that question by looking at the tax rate tables that show income tax rates of 10%, 15%, 25%, 28%, 33%, and 35%, you could be understating your real marginal tax rate. Your marginal tax rate could be higher due to numerous provisions that phase out or limit certain deductions, credits, and other tax benefits. Some of the more significant provisions include:

Continue reading "Figuring Out Your Real Marginal Tax Rate" »

September 7, 2007

Tax Planning for Major Life Events

Most of life’s major financial decisions have tax ramifications. Major life events such as marriage or divorce, the birth or adoption of a child, the purchase or sale of a home, and retirement all have tax ramifications. Keep the following tax-planning tips in mind as you encounter those events:

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September 3, 2007

Moving Tax Deduction: How Do I Qualify?

Tax laws and regulations are as easy to decipher and understand as a foreign language. When trying to evaluate whether your moving expenses are deductible on your income tax return there are a few tests you will need to pass.

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August 13, 2007

Investing in a Tax-Efficient Manner

During periods of uncertain returns, it becomes even more important to consider other ways to increase your portfolio’s value. One of those strategies is to invest in a tax-efficient manner.

Continue reading "Investing in a Tax-Efficient Manner" »

July 9, 2007

Benefits of Section 529 Plans

While section 529 plans always had significant tax benefits, there was concern because many of those benefits were scheduled to expire after 2010. However, the Pension Protection Act of 2006 made many section 529 plan provisions permanent. Thus, if you are looking for a way to fund your child’s college education, you should definitely take a look at section 529 plans. Consider these basic facts about section 529 plans:

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July 5, 2007

Rollovers for Nonspouse Beneficiaries

The Pension Protection Act of 2006 contained a provision allowing nonspouse beneficiaries to roll over funds from an employer pension plan to an inherited individual retirement account (IRA), starting in 2007. This was viewed as a significant development for nonspouse beneficiaries, since they would be able to extend distributions from employer pension plans over a longer period. However, recent guidance by the Internal Revenue Service (IRS) indicates that this provision may be difficult for nonspouse beneficiaries to implement.

Continue reading "Rollovers for Nonspouse Beneficiaries" »

July 3, 2007

Planning for 2010 Roth Conversions

Starting in 2010, all taxpayers, regardless of the amount of their adjusted gross income (AGI), can convert a traditional individual retirement account (IRA) to a Roth IRA. Before 2010, your AGI cannot exceed $100,000 to convert, not including any income resulting from the conversion. Amounts converted must be included in income if taxable when withdrawn (i.e., contributions and earnings in deductible IRAs and earnings in nondeductible IRAs), but are exempt from the 10% early withdrawal penalty.

Continue reading "Planning for 2010 Roth Conversions" »

January 7, 2007

2007 Tax Favored Savings Plan Updated Limits Summary

Are you confused about plan limits? This quick reference for 2007 should make your savings planning a little simpler.

If you do not know which plans may be best for your business structure, or what plans you are eligible to use, consult with a qualified advisor for assistance. They will also be able to do a comparison of your individual options.

Remember the maximum allowable compensation that can be used to determine plan contributions in 2007 is $225,000. For highly compensated employees, the ceiling is a much lower $100,000.

Continue reading "2007 Tax Favored Savings Plan Updated Limits Summary" »

December 17, 2006

Intuit Teams Up With Kiplinger

Intuit (INTU), the Mountain View California based maker of the hugely popular TurboTax, Quickbooks, and Quicken software titles announced this month a new collaboration with The Kiplinger Washington Editors, Inc.

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November 14, 2006

Who Is Affected by the Alternative Minimum Tax

The alternative minimum tax (AMT) was originally designed to ensure wealthy taxpayers paid at least a minimum amount of tax. However, due to the tax calculation, more and more taxpayers are becoming subject to the AMT. For instance, 3.6 million taxpayers paid the AMT with their 2005 tax returns, with that number projected to increase to 30 million, or 20% of all taxpayers, by 2010.

Continue reading "Who Is Affected by the Alternative Minimum Tax" »

October 4, 2006

Tax Planning Strategies

While many strategies can help you reduce your income tax bill, those strategies basically fall into three main techniques: reduce or eliminate taxes; postpone the payment of taxes until sometime in the future; and shift the tax burden to another individual.

Continue reading "Tax Planning Strategies" »

August 9, 2006

Considering Your (Stock) Options

To attract and keep top employees, more companies are offering them employee stock options. If you receive employee stock options as part of your compensation package, careful planning can help you make the most of them.

Continue reading "Considering Your (Stock) Options" »

June 8, 2006

Utilizing Losses in Your Portfolio

Capital gains on investments held for one year or less are short-term capital gains taxed at ordinary income tax rates. For investments held over one year, the maximum long-term capital gains tax rate is 15% (5% for taxpayers in the 10% or 15% tax bracket). While this is significantly below the maximum ordinary income tax rate of 35%, it still can take a significant chunk out of your investment portfolio.

Continue reading "Utilizing Losses in Your Portfolio" »

March 14, 2006

Deciding Where to Hold Investments

How earnings are taxed on investments depends on whether the investments are held in a taxable or tax-deferred retirement account.

Continue reading "Deciding Where to Hold Investments" »

January 25, 2006

Basic Facts about Taxes

The subject of income taxes is one that most people would prefer to ignore. However, since income taxes are a significant expense for most taxpayers, you should come to grips with some basics about taxes:

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December 14, 2005

Tax Strategies and Caring for Elderly Parents

As life expectancies continue to increase, it becomes increasingly likely that you may need to financially help an aging parent. If you find yourself in that situation, review the tax laws to determine whether you can obtain some tax relief.

Continue reading "Tax Strategies and Caring for Elderly Parents" »

September 12, 2005

10 Tax Strategies to Consider

If you’re looking for ways to reduce your income tax bill, you may want to consider the following tax-saving strategies:

Continue reading "10 Tax Strategies to Consider" »

July 12, 2005

Consider an IRA Conversion

With tax planning, the goal typically is to delay the payment of income taxes. Thus, it can be difficult to understand why it might make sense to convert a traditional Individual Retirement Account (IRA) to a Roth IRA, which results in the current payment of income taxes.

Continue reading "Consider an IRA Conversion" »

June 14, 2005

Taxes and Investing Strategies

One of your portfolio’s largest expenses is probably taxes. Ordinary income taxes on short-term capital gains and interest income can go as high as 35%, while long-term capital gains and dividend income are taxed at rates not exceeding 15% (5% if you are in the 10% or 15% tax bracket). One way to help keep your portfolio growing is to invest in a tax-efficient manner. Some suggestions include:

Continue reading "Taxes and Investing Strategies" »

January 30, 2005

Withdrawing Retirement Account Funds

After retirement, you’re likely to find that your retirement savings include several different vehicles, which might include: 401(k) plans, Individual Retirement Accounts (IRAs), profit-sharing plans, and taxable investments designated for retirement. When withdrawing funds, you need to decide the order in which to tap those accounts. Withdrawing your funds in the most tax-efficient manner can add years to their life, thus increasing your lifetime withdrawals. Typically, you’ll want to consider this strategy:

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December 11, 2004

Getting Ready for Income Tax Time

Although it might seem a bit early to start thinking about your 2004 tax return, much tax-related information arrives in January. Organizing this information as it comes in makes the tax preparation process easier. While organizing your tax records is not an exciting task, it's not an insurmountable one either. Follow these tips:

Continue reading "Getting Ready for Income Tax Time" »

October 12, 2004

Review Income Tax Planning Strategies

With marginal tax rates of up to 35%, income taxes can have a significant effect on your financial situation. There are basically three strategies to help reduce your income tax bill:

Continue reading "Review Income Tax Planning Strategies" »

June 1, 2004

Withdrawing Your IRA Funds

The tax laws regarding withdrawals from individual retirement accounts (IRAs) are complex. To avoid unnecessary penalties and to ensure you withdraw the funds efficiently, let's review the basics:

Continue reading "Withdrawing Your IRA Funds" »

July 1, 2003

Recharacterizing Your Roth Conversion

The steep market declines of the past three years have made converting from a traditional Individual Retirement Account (IRA) to a Roth IRA more attractive. When you convert, transferred amounts must be included in income if taxable when withdrawn (e.g., contributions and earnings in traditional IRAs and earnings in nondeductible IRAs), but are exempt from the 10% federal income tax penalty. Once the IRA is converted to a Roth IRA, qualified distributions may be taken on a tax-free basis. Thus, converting while values are low allows you to pay a lower tax bill and then withdraw the funds tax free in the future, hopefully after the values have recovered.

Continue reading "Recharacterizing Your Roth Conversion" »

Another Look at IRA Accounts

You have three choices for Individual Retirement Accounts (IRAs), each with different eligibility requirements and tax laws. In addition, the maximum annual contribution is changing. All this complexity makes it difficult to decide which IRA to select. To help you with that decision, first review the rules for each.

Continue reading "Another Look at IRA Accounts" »

June 1, 2003

Avoid Borrowing From Your 40l(k) Plan

Your 401(k) plan is such a tempting place to borrow money from. There are no credit checks or lengthy applications to fill out. You typically receive the loan proceeds in a couple of weeks. Loan proceeds can equal up to the lesser of 50% of your vested interest in the plan or $50,000. The loan can be repaid over five years, longer if it is used to purchase a primary residence. The interest rate is reasonable, typically one or two percentage points over the prime rate.

Continue reading "Avoid Borrowing From Your 40l(k) Plan" »

February 1, 2003

Look Out for These Tax Mistakes

If your objective is to pay the least amount of income taxes, then you need to be aware of these common tax mistakes:

Continue reading "Look Out for These Tax Mistakes" »

 

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