2010 Tax Planning Seminar2010 Tax Planning Seminar2010 Tax Planning Seminar2010 Tax Planning Seminar

Presented by

BlumShapiroBlumShapiro

The clock is ticking on savingsThe clock is ticking on savings….….The clock is ticking on savingsThe clock is ticking on savings….….

Tax Rate ForecastTax Rate ForecastTax Rate ForecastTax Rate Forecast

2010 20112010 201110% Eliminated

15% 15%25% 28%28% 31%33% 36%33% 36%35% 39.6%

Tax Credits and DeductionsTax Credits and DeductionsTax Credits and DeductionsTax Credits and Deductions

Credits: reduce tax dollar for dollar

Deductions: lower your taxable incomeDeductions: lower your taxable income

2010 Child Tax Credit2010 Child Tax Credit2010 Child Tax Credit2010 Child Tax Credit$1,000 per child$1,000 per child

Income Phaseout Ranges*

Single FilersSingle Filers Starts at $75,000

J i t FilJ i t Fil St t t $110 000Joint FilersJoint Filers Starts at $110,000*Adjusted Gross Income

Education CreditsEducation CreditsEducation CreditsEducation CreditsHope Scholarship Credit

(American Opportunity Tax Credit) = $2,500 maximumLifetime Learning Credit = $2,000 maximum

Making Work Pay CreditMaking Work Pay CreditMaking Work Pay CreditMaking Work Pay Credit

A dit fA credit for wage earners and the self-employed

• 6.2% of earned income or

• $400 a year for single filers

• $800 a year for joint filers

Standard DeductionStandard DeductionStandard DeductionStandard Deduction

• Single Filers: $5,700

• Joint Filers: $11,400

M i d Fili S t l $5 700• Married Filing Separately: $5,700

• Head of Household: $8 400• Head of Household: $8,400

Itemized DeductionsItemized DeductionsItemized Deductions Itemized Deductions Reduce Taxable IncomeReduce Taxable Income

• Medical expenses• Nonbusiness taxes• Interest expenses• Investment expenses• Professional fees• Professional fees• Charitable contributions

Donating to Charity?Donating to Charity?Donating to Charity?Donating to Charity?

• Donations of cash or property toDonations of cash or property to qualified charities are deductible.

• Charitable donations are limited to 50% of your adjusted gross income50% of your adjusted gross income.

D d ti f hi l d ti• Deductions for vehicle donations are limited for vehicles worth more than $500.

Health InsuranceHealth InsuranceHealth InsuranceHealth Insurance

• Individual Coverage Mandate• Individual Coverage Mandate begins in 2014.

• Subsidies will be provided f th i dfor the uninsured.

• New taxes will be levied to cover the costs of subsidies..

Retirement Savings = Tax SavingsRetirement Savings = Tax SavingsRetirement Savings Tax SavingsRetirement Savings Tax Savings

EmployerEmployer--Sponsored PlansSponsored PlansEmployerEmployer Sponsored PlansSponsored Plans

• Defined Benefit Plans• Defined Benefit Plans

• Defined Contribution Plans

401(k) Contribution Limits 2010401(k) Contribution Limits 2010401(k) Contribution Limits 2010401(k) Contribution Limits 2010

Under Age 50: $16,500

Additional “Catch-Up”Additional Catch Up for those Age 50 and Older: $5 500and Older: $5,500

The Roth 401(k)The Roth 401(k)The Roth 401(k)The Roth 401(k)

C t ib ti d ith ft t d ll• Contributions are made with after-tax dollars.

• Earnings grow tax free.

• Distributions are tax free in retirement.

H h f iH h f iHow much of your incomeHow much of your income

will you need in retirement?will you need in retirement?

IRA Contribution LimitsIRA Contribution LimitsIRA Contribution LimitsIRA Contribution Limits

2010

Under Age 50 $5,000

A 50 d Old $6 000Age 50 and Older $6,000

Roth IRAsRoth IRAsRoth IRAsRoth IRAs

• Make contributions with after-tax dollarsMake contributions with after tax dollars

R i t f di t ib ti• Receive tax-free distributions

Roth IRA Income Limits*Roth IRA Income Limits*Roth IRA Income LimitsRoth IRA Income Limits

Contributions Reduced Ineligible

Single Filers

$105,000 – $120,000 Over $120,000FilersJoint Filers $167,000 – $177,000 Over $177,000

*Modified adjusted gross income

Roth IRA ConversionsRoth IRA ConversionsRoth IRA ConversionsRoth IRA Conversions

Income limits on conversions have been eliminated in 2010.

You will be taxed on the conversion amountYou will be taxed on the conversion amount.

You will not owe a penalty

Tax Tip:Tax Tip:Tax Tip:Tax Tip:

IRA iIRA savings can be used without penalty for qualified college expensescollege expenses or to help pay for

fi t hyour first home.

Which IRA Is Best for You?Which IRA Is Best for You?Which IRA Is Best for You?Which IRA Is Best for You?Roth vs. TraditionalRoth vs. Traditional

Taxes Reduced for Capital GainsTaxes Reduced for Capital GainsTaxes Reduced for Capital Gains Taxes Reduced for Capital Gains and Dividends through 2010and Dividends through 2010

Capital Gains Tax RatesCapital Gains Tax RatesCapital Gains Tax RatesCapital Gains Tax Rates

• 15% for investors in the top four bracketsthe top four brackets

• Zero tax through 2010 for investors in the 10% %and 15% brackets

WARNING!

No Tax Relief for No Tax Relief for ShortShort Term Gains!Term Gains!ShortShort--Term Gains!Term Gains!

Capital Gains AdvantageCapital Gains AdvantageCapital Gains AdvantageCapital Gains Advantage

Gain Tax Net Cash

11 months $50,000 $17,500 $32,500

12 months $40,000 $ 6,000 $34,000

Other Gains Rates UnchangedOther Gains Rates UnchangedOther Gains Rates UnchangedOther Gains Rates Unchanged

Collectibles 28%Collectibles 28%

Real estateReal estate depreciation recapture 25%

WARNING!WARNING!

Large Gains Can Trigger the AMTLarge Gains Can Trigger the AMT

AMT Danger ZonesAMT Danger ZonesAMT Danger ZonesAMT Danger Zones• Large capital gainsg p g• Numerous dependency exemptions

Large state income tax deductions• Large state income tax deductions• Large deductions for unreimbursed

l b iemployee business expenses or miscellaneous expenses

• Substantial medical expenses• Incentive stock optionsp

2010 AMT Exemption Amounts2010 AMT Exemption Amounts2010 AMT Exemption Amounts2010 AMT Exemption Amounts(without further reform)

$45 000 f j i t fil• $45,000 for joint filers, down from $70,950 in 2009

• $33 750 for single filers• $33,750 for single filers, down from $46,700 in 2009

Tax Tip:Tax Tip:Tax Tip:Tax Tip:

Offset gains in your portfolio with losses at the end of the tax year.losses at the end of the tax year.

Dividend Tax RatesDividend Tax RatesDividend Tax RatesDividend Tax Rates

• 15% for investors in the top four bracketsp

• Zero tax through 2010• Zero tax through 2010 for investors in the 10% and 15% bracketsand 15% brackets

Dividend vs. Ordinary IncomeDividend vs. Ordinary IncomeDividend vs. Ordinary IncomeDividend vs. Ordinary Income

Ordinary income rates 10% – 35%

Dividend rates 0% – 15%

Rates apply for both regular tax and AMT.

Qualifying DividendsQualifying DividendsQualifying DividendsQualifying Dividends

• Domestic corporations

• Certain foreign corporationsCertain foreign corporations

Certain mutual fund dividends• Certain mutual fund dividends

NonNon--Qualifying DividendsQualifying DividendsNonNon Qualifying DividendsQualifying Dividends

• Retirement plans or IRAsRetirement plans or IRAs

M t l f d i t t• Mutual fund interest and short-term gains

• Money market interestMoney market interest

S ti di t ib ti• S corporation distributions

15% dividends 15% dividends cannot offset investmentcannot offset investmentcannot offset investment cannot offset investment

interest expense.interest expense.

15% di id d15% di id d15% dividends 15% dividends also cannot offsetalso cannot offsetalso cannot offset also cannot offset

capital losses.capital losses.

Ordinary Ordinary 15%15%Income Income InterestInterest

15% 15% DividendsDividends vs.vs.

InterestInterest

No 15% rate for dividendsNo 15% rate for dividendsNo 15% rate for dividends No 15% rate for dividends in retirement plansin retirement plans

Hold stock earning dividends taxed at 15% outside of retirement accountsat 15% outside of retirement accounts

• Not all stocks are created equal.c ea ed equa

Some stocks do• Some stocks do not pay dividends.

• Choose investments that make senseChoose investments that make sense for you.

Capital Capital Current Current vs.vs.AppreciationAppreciationIncomeIncome

vs.vs.

Focus on Total ReturnFocus on Total Return

Sell appreciated stock andSell appreciated stock andSell appreciated stock andSell appreciated stock anduse the proceeds to…use the proceeds to…

• Buy dividend-paying stocky p y g

Diversify investment holdings• Diversify investment holdings

• Change asset allocations

What isWhat isWhat is…What is…

LongLong--TermTerm

Tax Goals vs Investing GoalsTax Goals vs Investing GoalsTax Goals vs. Investing GoalsTax Goals vs. Investing Goals

Always consider:• Portfolio balance• Portfolio balance

• Risk tolerance

• An investment’s impact on your situationimpact on your situation

Plan around the “Kiddie Tax”Plan around the “Kiddie Tax”Plan around the Kiddie TaxPlan around the Kiddie Tax

Applies to children under age 19Applies to children under age 19, or age 24 for full-time students.

Good NewsGood NewsGood News Good News for Business Ownersfor Business Owners

• Tax incentives for hiring gand retaining workers

• Tax breaks for providing health insurance

• Increased Section 179 expensing

Hiring IncentivesHiring IncentivesHiring IncentivesHiring Incentives

• New Hires: Social Security tax liability is waived throughliability is waived through December 31, 2010.

• Retained Hires: A $1,000 credit for each qualified new hire who is retained for one year.is retained for one year.

Work Opportunity Tax CreditWork Opportunity Tax CreditWork Opportunity Tax Credit Work Opportunity Tax Credit (WOTC)(WOTC)

• Available through 2011

• Eligibility expanded through 2010

“Green” Business Tax Breaks“Green” Business Tax BreaksGreen Business Tax BreaksGreen Business Tax Breaks

• Deduction for energy saving improvements• Deduction for energy-saving improvements • Renewable energy production credits:

– SolarBi– Biomass

– GeothermalWi d– Wind

Health Insurance ReformHealth Insurance ReformHealth Insurance ReformHealth Insurance Reform

• No employer requirement• No employer requirement

• “Pay or Play” rules starting in 2014

• Tax Credit for premiums in 2010

Section 199 DomesticSection 199 DomesticSection 199 Domestic Section 199 Domestic Manufacturing DeductionManufacturing Deduction

9% f QPAI i 2010• 9% of QPAI in 2010

• 50% of wages apply

Section 179 Expensing 2010Section 179 Expensing 2010Section 179 Expensing 2010Section 179 Expensing 2010

Expense allowance $250,000p

Ph t th h ld $800 000Phaseout threshold $800,000

Deduct $25 000 forDeduct $25 000 forDeduct $25,000 for Deduct $25,000 for Heavy SUVs or TrucksHeavy SUVs or Trucks

Plan Your AssetPlan Your AssetPlan Your Asset Plan Your Asset Purchases WiselyPurchases Wisely

Make large purchases before 2011

Don’t forget aboutDon’t forget aboutDon t forget about Don t forget about depreciation recapturedepreciation recapture

Cost Cost S tiS tiSegregation Segregation

Nets $$$Nets $$$Nets $$$Nets $$$

Cost SegregationCost SegregationCost SegregationCost Segregation

Shorter Lives = Quicker Write-Offs

Capital Gains TipsCapital Gains TipsCapital Gains Tips Capital Gains Tips for Businessesfor Businesses

H ldi i d• Holding period

• Character of assets

Installment SalesInstallment SalesInstallment SalesInstallment Sales

• The 15% capital gains rate is good through 2010is good through 2010.

• Beyond 2010, plan for the increased tax rate when negotiating sales.

TT D f dD f d T blT blTaxTax--Deferred Deferred vs.vs. TaxableTaxable

R id T D f l T h iReconsider Tax-Deferral Techniques

Business StructureBusiness StructureBusiness StructureBusiness Structure

Is it time to switch to a pass-through entity?g y

Take Out Earnings PriorTake Out Earnings PriorTake Out Earnings Prior Take Out Earnings Prior to Making an “S” Electionto Making an “S” Election

• Take advantage of capital gain rates

• Reduce passive income concerns

• Reduce C corporation earnings concerns

S CorporationsS CorporationsS CorporationsS Corporations

• Permissible number of shareholders is 100.shareholders is 100.

• Eligible members of the same family may be treated as a y ysingle shareholder.

Closely Held CompaniesClosely Held CompaniesClosely Held CompaniesClosely Held Companies

• Shift appreciation

• Shift income

• Pay tax at a yreduced rate

Plan for Business ContinuationPlan for Business ContinuationPlan for Business ContinuationPlan for Business Continuation

• Transfer control according to your wishes

• Minimize your tax liabilitiesMinimize your tax liabilities

• Fund your retirement

• Preserve wealth for your family

The Benefits of Estate PlanningThe Benefits of Estate PlanningThe Benefits of Estate PlanningThe Benefits of Estate Planning

•• Preserve assets

• Minimize taxes• Minimize taxes

• Distribute property

Why Plan?Why Plan?Why Plan?Why Plan?

Y t t b l th thi k• Your estate may be larger than you think.

• Changes in tax laws do not eliminate the need for estate planning.

• Failure to plan your estate may result in p y ylegal and financial problems for your heirs.

Gift and Estate Tax ExemptionsGift and Estate Tax ExemptionsGift and Estate Tax ExemptionsGift and Estate Tax Exemptions

Year Estate Tax Exemption

Gift Tax Exemption

2010 Estate tax $1 000 0002010 Estate tax repealed

$1,000,000

20112011 and after $1,000,000 $1,000,000

Carryover BasisCarryover BasisCarryover Basis Carryover Basis Rules Take Rules Take Effect with Effect with Estate TaxEstate Tax

WARNING!Estate Tax Estate Tax

Repeal!Repeal!

“Gifting” Your Way to Savings“Gifting” Your Way to SavingsGifting Your Way to SavingsGifting Your Way to Savings

• You can make tax-free gifts of up toYou can make tax free gifts of up to $13,000 per person, per year.

• Married couples can gift a total of• Married couples can gift a total of $26,000 per person, per year.

• You can make unlimited tax-free gifts by setting up direct payments t d ti l i tit ti dto educational institutions and medical providers.

Gifting AdvantagesGifting AdvantagesGifting AdvantagesGifting Advantages

• Post gift appreciation escapes estate tax• Post-gift appreciation escapes estate tax.

• To the extent of the $13,000/$26,000 per donee, per year annual exclusion, no transfer tax is ever imposed.

• Gift tax paid reduces your taxable estate.

• Post-gift income is taxed to the recipient.

WARNING!

Beware of the GenerationBeware of the Generation--Beware of the GenerationBeware of the GenerationSkipping Transfer Tax!Skipping Transfer Tax!

Commonly Used TrustsCommonly Used TrustsCommonly Used TrustsCommonly Used Trusts• Credit Shelter or Bypass TrustCredit Shelter or Bypass Trust

• Dynasty TrustDynasty Trust

• Irrevocable Life Insurance TrustIrrevocable Life Insurance Trust

• Charitable Remainder TrustCharitable Remainder Trust

• Qualified Terminable Interest Property TrustQualified Terminable Interest Property Trust

Wondering how toWondering how to pay estate taxes?

ConsiderConsiderConsiderConsiderLife InsuranceLife InsuranceLife InsuranceLife Insurance

Plan to Save!Plan to Save!Plan to Save!Plan to Save!

We can help you it h i tmonitor changing tax

laws and update pyour strategies

accordinglyaccordingly.

2010 Tax Planning Seminar2010 Tax Planning Seminar2010 Tax Planning Seminar2010 Tax Planning Seminar

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