1. Exemptions directly reduce your taxable income.  There are two types of exemptions: personal exemptions and exemptions for each person you can claim as a dependent.  You can claim a personal exemption for yourself as long as no one else is claiming you as a dependent.  In 2011, you can deduct $3,700 for each exemption.
2. What about my spouse? When filing jointly, you can generally claim an exemption for both yourself and your spouse.  If you are filing separately however, you can only claim an exemption for your spouse if he/she had no gross income and was not a dependent of another taxpayer.
3. What is a “dependent”? Generally, you can claim an exemption for EACH of your dependents.  A dependent is a qualifying child or relative. You can find more information about what qualifies a person as a dependent in this IRS publication.  Generally, you cannot claim a married person as dependent if they file jointly, and there are residency requirements, with certain exceptions for adopted children.
4. Do “dependents” have to file a tax return? The answer is “sometimes.”  Just because someone claims you as a dependent, does not mean you won’t be required to file a personal tax return.  It depends on your income level and marital status.
5. Dependent and exemption don’t mix.  If someone else, like a parent, claims you as a dependent, you MAY NOT claim your personal exemption.

Glass Jacobson’s Tax Team doesn’t just report your taxes, we serve as your advisor to influence your overall tax picture and understand the tax implications of every financial move you make.  If you have questions, or want “second opinion” on your tax strategy to make sure you are capitalizing on all opportunities, contact us.

1. Unless Congress institutes another “patch,” we will see reduced alternative minimum tax exemption amounts.  Beginning in 2012, AMT exemption amounts revert to the much lower “permanent” amounts: $33,750 for unmarried taxpayers, $45,000 for joint filers and $22,500 for marrieds filing separately.  What is the AMT and what does this change mean to you?
2. The adoption credit will go down in 2012, to $12,650 (from $13,360 in 2011)
3. Beginning in 2012, U.S. taxpayers with specified foreign financial assets will be required to report these assets to the IRS on Form 8938 (if the aggregate value exceeds $50,000).

Some of these changes may be affected by new legislation, so we’ll be sure to keep you posted.  Meanwhile, start watching for your tax documents, and if you have any questions about filing your 2011 individual return, contact us!

]]> http://www.glassjacobson.com/2012/01/tax-changes-in-2012/feed/ 0 http://www.glassjacobson.com/2011/12/more-last-minute-tax-strategies/ http://www.glassjacobson.com/2011/12/more-last-minute-tax-strategies/#comments Tue, 27 Dec 2011 16:41:27 +0000 ssedlak http://www.glassjacobson.com/?p=2609 Continued from last week’s post on 4 tax saving strategies, here are a few more ideas, plus some additional details on the ones we already talked about.

Updates:

1. Make a charitable contribution. Check out this IRS publication for  more information on which records to save.  Any clothes or household goods donated must be in good condition to be deductible.  Credit card donations make before 12/31 are deductible even if you don’t pay the bill until 2012.
2. Contributing to retirement plans: though and deferrals made to employer sponsored plans must be made by 12/31, you have until April 17, 2012 to set up a new IRA or add money to an existing account and still have it count towards 2011.

Some new ideas:

1. Bad year for your investment portfolio? You can normally deduct losses up to the amount of your capital gains, plus $3000 from other income.  If your net losses are more than $3,000, the excess can be carried forward and deducted in future years.
2. Improve your home’s energy efficiency. Installing insulation, water heaters or new windows could translate into a $500 tax credit.  If you are looking at alternative energy for your home, the Residential Energy Efficient Property Credit equals a 30% credit on the cost of solar, wind, geothermal or heat pump equipment.
3. Employers, don’t forget the Health Care Tax Credit: if you pay at least half of your employee’s health insurance premiums, you may qualify.  Check out this previous post to determine your eligibility.

Contact us to make sure you are taking advantage of all these opportunities:

sarah.sedlak@glassjacobson.com

Details over which party wants what aside (a 2 month extension, a year extension, an oil pipeline (??)), the payroll tax affects 160 million Americans.  If the payroll tax is not extended, it would cost the American family making $75,000 per year an extra $1,500 in taxes.  This could be a tricky time for a tax increase of this magnitude, with the economy still in a fragile state and unemployment high.

The National Payroll Reporting Consortium’s president, Pete Isberg has now weighed in, writing that complex payroll systems may require “at least 90 days for a change of this magnitude for software testing alone, not to mention analysis, design, coding and implementation.”  The NRPC worries that a two month extension would be less feasible than at least a quarter of the calendar year.

At Glass Jacobson, we certainly cannot predict how this latest battle will shake out.  We are as frustrated with this “political” inaction as are all of our clients.  It is a real shame that given the real challenges in our economy that are truly beyond anyone’s control, our politicians continue to add problems that they could fix.  As more information becomes available, we will update and advise our clients accordingly.  Stay tuned.

Questions?

michael.cohen@glassjacobson.com

1. Capital Gains:

Long-term capital gains continue to be taxed at favorable rates through 2012, with middle- and higher-income investors taxed at a maximum rate of 15 percent. Low-income tax payers in the 10 and 15 percent brackets for ordinary income have a zero-percent rate, meaning they do not pay tax on any long-term gains or qualified dividends. Selling now (or in 2012) is sensible if the investor wants to cash in capital gains.

If you are looking for long-term rates, investors are required to hold an asset for longer than one calendar year.  It remains to be seen what Congress will do about the capital-gains increase in 2013, and absent of any action, tax rates will go up.  Investors may want to consider purchasing assets before the end of 2011 so they can sell before 2013, while they are still guaranteed favorable rates.

2. Stock Sales

Investors should remember that stock is treated as sold on the trade date.  So, if you sell stock on December 29, 2011 but the settlement date is not until January, the gains and losses from the sales would still be recognized on the 2011 tax return.

3. Retirement Account Contributions

One quick strategy to reduce tax liability is to make a contribution to a traditional retirement account (IRA, 401(k), 403(b), SIMPLE IRA or SEP plan) and take advantage of the deductions.  Traditional IRAs are particularly easy to set up.

4. Charitable Giving

If you plan on deducting a charitable contribution, remember that the IRS requires the taxpayer to maintain a bank record or receipt.

For any contribution of $250 or more, the taxpayer must obtain and keep records of written acknowledgment from the qualified organization. Documentation for property with higher values requires an appraisal.

Contact us if you need help with planning or have questions.  Now is the time!

Questions about how you can plan for the year end and start 2012 on the right foot?

jeff.cohen@glassjacobson.com

Today’s seminar, held over lunch, focused on women in the empty nest stage.  Women at this time in their lives finally have a moment to think about their own future!  Christine Schmitz of Glass Jacobson shared some interesting financial tools women can use to accumulate assets for their retirement, Kim Battaglia of Hodes, Pessin and Katz talked about legal ways to protect those assets, and our special guest, Elise Rubinstein, a Health Coach, helped us understand how we can feel good enough to enjoy them.

We will be posting the tools, articles and handouts from today’s session here.

Our next seminar, Business 101, is scheduled for November 15th from 11:45-1:30.  More details to follow.

1. Generally, you are eligible to exclude the gain from income if you have owned and used the home as your MAIN RESIDENCE for two out of the last five years prior to the date of its sale.
2. If you have a gain from the sales of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return).
3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the 2 year period prior the sale.
4. If you can exclude the gain, you do not need to report the sale on your tax return.
5. If the gain cannot be excluded and is taxable, you must report it on Form 1040.
6. You cannot deduct a loss from the sale of your main home.
7. Use the worksheets included in IRS Publication 523 to help you calculate what can be excluded.
8. You can only exclude the gain from the sale of your main home.  If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
9. If you received the fist-time homebuyer credit and within36 months of the date of purchase, the property is no longer used as your principal residence, you must repay the credit.
10. Always update your address with the IRS and US Postal Service when you move.

Questions?

sam.cohen@glassjacobson.com

1. Make sure the organization qualifies.  You can find a full list of qualifying organizations at www.irs.gov.  Check IRS Publication 78.
2. You must itemize.
3. Deduction value.  You can generally deduct your cash contributions and the fair market value of most property you donate.  Special rules apply to several types of donated property, including clothing, household items, cars and boats.
4. Receiving gifts or services in return.  When your contribution entitles you to receive merchandise, services or goods- like admission to a charity banquet- you can deduct only the amount that exceeds fair market value of the benefit received.
5. Recordkeeping.  Keep good records of any contribution you make, regardless of the amount.
6. Pledges and payments.  Only contributions actually made during the tax year are deductible.  If you pledge an amount to a charitable organization in 2010, but do not pay the full amount by 12/31, you can only deduct the amount paid.
7. Donations made near the end of the year.  Include credit card payments and payments by check in the year you gave them to the charity, even though you may not pay the credit card bill or have your checking account debited until the following year.
8. Large donations.  For any contribution $250 or more, you need to have more than a bank record.  You must have written acknowledgement from the organization.  For items valued at more than $500 you must complete IRS Form 8283.  For a contribution of noncash property valued at more than $5000, you generally must obtain an appraisal.
9. Tax exemption revoked.  Approximately 275,000 organizations lost their tax-exempt status recently because they did not file required reports in a timely manner, as required by law.  Donations made to one of these organizations prior to the organization’s status revocation remain tax-deductible.

Questions?

sam.cohen@glassjacobson.com

How many of you dentists and non-dentists out there approach your financial future like you do your vacation?  How many of you plan for the future:  your retirement, your children’s education, your insurance needs and other financial needs?  My professional experience has been that many more people plan their vacations than plan their financial future.

The are many reasons:

• The time necessary to gather the material to start the process
• The cost
• The fear of not being able to implement the plan
• Not wanting to be constrained to a budget
• Embarrassed at how much wealth one has accumulated

I am frequently asked by clients how much they should contribute to a child’s 529 Plan or what type of mutual fund purchase is best.  While these may sound like simple questions there are many factors that need to be taken into account.  The answer for each individual or family will be different.  There are no cookie cutter answers to these questions.

We’ve all seen commercials where it says some stunt was performed by a professional and to not try this at home.  Planning for your financial future works the same way.  Unless you have the time and resources available you should be leaving your financial plan to professionals and not try it at home.

The financial services professionals at Glass Jacobson can help you plan for your future so you don’t get lost.  You should put as much planning into your financial future as you do your vacation.  We would be happy to discuss your financial needs with you and put you on the right path.  Give us a call today.