Early investment planning can save taxes

Capital gain rates will remain at a maximum of 15% (and a minimum of 0%) through December 31, 2012. The rates apply to qualified dividends and long-term gains from investments you sell. That makes 2011 a good time to implement strategies for potential tax savings.

One example: You may be able to manage your income to stay within the 10% or 15% income tax brackets, which would allow you to take advantage of the 0% capital gain rate.

Alternatively, you could gift appreciated stock to family members in those brackets. For 2011, the cutoff for the 15% bracket is $69,000 of taxable income when you’re married filing jointly ($34,500 for singles).

It might be time to “harvest” some of your investment gains in case tax rates rise again in the future. Also a tax-savvy way to completely eliminate your capital gains tax might be to donate appreciated stock to charity and receive a deduction equal to the security’s current market value. Special rules apply to noncash donations, so check with us before you move forward on this strategy.

Dont Overlook common missed Tax savings deduction

Don’t overlook tax-saving deductions

If you itemize deductions on your tax return, every additional deduction you find will save you money. In the past, higher-income taxpayers had their itemized deductions limited. Effective for 2010, 2011, and 2012 tax returns, there is no income-based reduction in total itemized deductions. That may give higher-income taxpayers another reason to track their deductions carefully.

Here’s a sampling of often-missed deductions.

* Disaster losses not reimbursed by insurance.

* Job-hunting travel and telephone expenses.

* Employment agency and job counseling fees.

* Costs for resume preparation.

* Union or professional association dues.

* Specialized work clothing or small tools used at work.

* Points paid by you on a new home loan.

* Home mortgage points paid by a seller on your behalf.

* Points paid on refinancing your home mortgage (deductible pro rata over the life of the loan).

* Remaining undeducted points on a prior refinancing when you refinance again.

* Your actual expenses or 14¢ a mile for driving in doing charitable work.

* Gambling losses, but only to the extent of your winnings.

* Fees paid for the preparation of your tax return.

For assistance in identifying all the deductions to which you are entitled, contact our office. We are here to help you pay the lowest tax allowed under the law.

Home offices – when can you take a deduction?

If you work at home, you’d probably like to take a tax deduction for your home office. Here’s an overview of what qualifies.

The first requirement is that you have a part of your home that you use regularly and exclusively for business purposes. It doesn’t have to be a separate room, but it must be a clearly defined area. The exclusive use is very important. The area must be reserved only for business use; if you also use it for personal activities, it won’t qualify. The only exceptions are if you store business samples or inventory at home, or if you run a home daycare business.

The other requirement is that your home office be any one of the following:

* Your principal place of business. That’s the place where you conduct most of the management and administrative activities of running your business. You may travel to meet customers, or perform operations in a hospital, but your principal place of business is where you do most of the work of actually managing your business.

* A place where you regularly meet customers, clients, or patients. Even if you run the business from elsewhere, a home office can qualify if you regularly use it for meeting with customers, clients, or patients.

* A separate building, not connected to your home. A freestanding garage or studio will qualify if it is used in your business.

If you have an area of your home that qualifies, you can generally deduct a percentage of your total costs, including mortgage interest, insurance, taxes, and utilities. The percentage is calculated as the area used for business divided by your home’s total area.

The rules on home offices are complex, with many gray areas. Contact our office if you need more information or assistance.

Tax Alert – 2 IRA deadlines approach –

Do either of these IRA deadlines apply to you or your family?

Deadline #1 – April 1, 2011, is the final date by which you must take your first IRA distribution if you turned 70½ last year. If you fail to take your distribution by this deadline, you face a 50% penalty tax on the amount you should have withdrawn. The requirement doesn’t apply to Roth IRAs, but unless you’re still working, it does apply to your other retirement plans.

Deadline #2 – April 18, 2011, is the last day you can make an IRA contribution for the year 2010. Remember, the 2010 contribution limit is $5,000 if you’re under age 50 and $6,000 if you’re 50 or older.

If you need more information or assistance, contact our office.

Business Tax Time – March 15 due date

Corporate filing deadline is March 15

The deadline for calendar-year corporations to file 2010 tax returns is March 15, 2011. Is that date arriving faster than you expected? If you’re not ready to file your corporate tax return for calendar year 2010 – and in some cases, even if you are – you may want to request a six-month extension of time.

Here are four tips.

1. File the extension by the due date of your return. You can mail Form 7004 to the IRS or file it electronically. Either way, be sure to submit it before this year’s due date of Tuesday, March 15 (for calendar-year corporations). Remember to send in a separate form for each corporation you own.

2. The extension is for filing only. That means you’ll have to estimate and pay any tax due by March 15 in order to avoid penalty and interest charges.

3. The six-month extension is automatic. An approved extension postpones your filing due date to September 15, 2011. You don’t have to sign Form 7004, and the IRS no longer sends approval notifications.

4. Check your state requirements. Some states recognize an approved federal extension of time to file; some grant extensions automatically and some require separate forms. In most cases, to avoid penalties and interest, you’ll need to estimate and pay the state tax by the original due date of your return.

Besides giving you additional time to gather your records, a corporate filing extension can offer other benefits. For example, you may be able to delay making contributions to your retirement plan. Certain elections can also be extended. Contact our office if you need more informati