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PVW Law: Year End Tax Planning Tips

planning matters • with PVW Law

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Year end tax planning continues to be a challenge due to the uncertain legislative climate. Many are concerned that Congress will enact sweeping tax reform at year end. Consider holding off on permanent moves until the final hour of 2011.

Consider the following year end tax planning moves for individuals:

• ANNUAL EXCLUSION GIFTS. You can make gifts of up to $13,000 per done in 2011 to an unlimited number of individuals.

• CHARITABLE GIFTS FROM IRA. If you are age 70 ½ or over, own IRAs and are considering a charitable gift, consider making the gift directly to achieve tax savings. Distinguish a direct transfer from taking a distribution and then making a gift.

• ESTATE PLANNING LARGER GIFTS. Consider whether 2011 is a year to make larger gifts. The estate tax credit exemption equivalent is currently $5 million. It is unclear whether that exemption will remain intact. Given strong moves for repeal of the estate tax over the past several years, you do have to consider the risk of making major gifts that are ultimately not needed.

• BACKING OUT OF A ROTH IRA CONVERSION. If you converted assets from a traditional IRA to a ROTH-IRA earlier in the year when asset values were higher, you are subject o income tax on those higher values. You can back out of the transaction by recharacterizing the rollover or conversion back into a traditional IRA.

• HEALTH INSURANCE OPTIONS. Review and revisit the structure of your health benefits and your utilization of any flexible spending accounts or health savings accounts.

• TIMING OF INCOME AND EXPENSES. Review income and expense items and to the extent possible, consider whether you will be better off accelerating or deferring any of such items.

• ENERGY SAVINGS CREDIT. Various energy savings expenditures on your residence will qualify for a tax credit if installed before 2012.

• RETIREMENT PLANS. Review your retirement plan to ensure you are maximizing your benefits. If you are self-employed, consider setting up a self-employed retirement plan.

• REVIEW GAINS AND LOSSES. Review the status of capital gains and losses. There are ways that you can realize losses while preserving your investment position.

• STATE INCOME TAXES. If you are likely to owe state income taxes, increase your state income tax withholding so that you get a deduction for the taxes in the current year.

• CLEAN HOUSE. Clean house and make charitable donations before year end. Keep track of the items donated. You can often claim a greater deduction than you expect.

• ALTERNATIVE MINIMUM TAX. Be aware of the alternative minimum tax. Many tax breaks allowed as deductions for regular tax calculation are not allowed for AMT calculation. Examples are property taxes on your residence, state income taxes, miscellaneous itemized deductions and personal exemption deductions. When considering deductions that are impact AMT, be sure you will get the deduction value.

• HIGHER EDUCATION EXPENSE DEDUCTION. Unless extended, 2011 is that last year to deduct expenses for qualified higher education.


For more information visit www.pvwlaw.com


-end- metroMAGAZINE




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