Retirement Plans and Business Related
Individuals - Retirement
Contribution Limits
The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased from $16,500 to $17,000. Contribution limits for SIMPLE plans remain at $11,500. The maximum compensation used to determine contributions increases to $250,000 (up $5,000 from 2011 levels).
Income Phase-out Ranges
The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000 and $66,000 in 2011.
For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple's income is between $173,000 and $183,000, up from $169,000 and $179,000.
The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to $183,000 for married couples filing jointly, up from
$169,000 to $179,000 in 2011. For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
Saver's Credit
The AGI limit for the saver's credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is
$57,500 for married couples filing jointly, up from $56,500 in 2011;
$43,125 for heads of household, up from $42,375; and $28,750 for married individuals filing separately and for singles, up from $28,250.
Businesses
Standard Mileage Rates
The rate for business miles driven is 55.5 cents per mile for 2012, unchanged from the mid-year adjustment that became effective on July 1, 2011.
Section 179 Expensing
For 2012 the maximum Section 179 expense deduction for equipment purchases is $139,000 (down from $500,000 in 2011) of the first $560,000 (down from $2 million in 2011) of business property placed in service during the year.
Transportation Fringe Benefits
If you provide transportation fringe benefits to your employees, for tax years beginning in 2012 the maximum monthly limitation for transportation in a commuter highway vehicle as well as any transit pass is $125 (down from $230 in 2011). The monthly limitation for qualified parking is $240 (up from $230 in 2011).
Work Opportunity Credit
The work opportunity credit has been expanded to provide employers with new incentives to hire certain unemployed veterans. Businesses claim the credit as part of the general business credit and tax-exempt organizations claim it against their payroll tax liability. The credit is available for eligible unemployed veterans who begin work on or after November 22, 2011, and before January 1, 2013.
While this checklist outlines important tax changes already in place for 2012, additional changes in tax law are more than likely to arise during the year ahead.Don't hesitate to call us if you want to get an early start on tax planning for 2012. We're here to help!
Friday, January 27, 2012
Thursday, January 19, 2012
Tax Changes for 2012: A Checklist for Individuals - Part II of a Three-Part Series
Adoption Credit
For taxable years beginning in 2012, the credit allowed for an adoption of a child with special needs is $12,650. For taxable years beginning in 2012, the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $12,650. The available adoption credit begins to phase out for taxpayers with modified adjusted gross income
(MAGI) in excess of $189,710 and is completely phased out for taxpayers with modified adjusted gross income of $229,710 or more.
Child Tax Credit
For taxable years beginning in 2012, the value used to determine the amount of credit that may be refundable is $3,000.
Earned Income Credit
For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children. In addition, for taxable years beginning in 2012, the earned income tax credit is not allowed if certain investment income exceeds $3,200.
Additional Child Credit
The $1,000 per-child additional child tax credit has been extended through 2012. The credit will decrease to $500 per child in 2013.
Individuals - Education
Hope Scholarship - American Opportunity, and Lifetime Learning Credits The maximum Hope Scholarship Credit allowable for taxable years beginning in 2012 is $2,500.
The modified adjusted gross income (MAGI) threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
Interest on Educational Loans
For taxable years beginning in 2012, the $2,500 maximum deduction for interest paid on qualified education loans begins to phase out for taxpayers with modified adjusted gross income (MAGI) in excess of
$60,000 ($125,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of $75,000 or more
($155,000 or more for joint returns).
While this checklist outlines important tax changes already in place for 2012, additional changes in tax law are more than likely to arise during the year ahead.
Don't hesitate to call us at 401-921-2000 if you want to get an early start on tax planning for 2012. We're here to help!
For taxable years beginning in 2012, the credit allowed for an adoption of a child with special needs is $12,650. For taxable years beginning in 2012, the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $12,650. The available adoption credit begins to phase out for taxpayers with modified adjusted gross income
(MAGI) in excess of $189,710 and is completely phased out for taxpayers with modified adjusted gross income of $229,710 or more.
Child Tax Credit
For taxable years beginning in 2012, the value used to determine the amount of credit that may be refundable is $3,000.
Earned Income Credit
For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children. In addition, for taxable years beginning in 2012, the earned income tax credit is not allowed if certain investment income exceeds $3,200.
Additional Child Credit
The $1,000 per-child additional child tax credit has been extended through 2012. The credit will decrease to $500 per child in 2013.
Individuals - Education
Hope Scholarship - American Opportunity, and Lifetime Learning Credits The maximum Hope Scholarship Credit allowable for taxable years beginning in 2012 is $2,500.
The modified adjusted gross income (MAGI) threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
Interest on Educational Loans
For taxable years beginning in 2012, the $2,500 maximum deduction for interest paid on qualified education loans begins to phase out for taxpayers with modified adjusted gross income (MAGI) in excess of
$60,000 ($125,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of $75,000 or more
($155,000 or more for joint returns).
While this checklist outlines important tax changes already in place for 2012, additional changes in tax law are more than likely to arise during the year ahead.
Don't hesitate to call us at 401-921-2000 if you want to get an early start on tax planning for 2012. We're here to help!
Tuesday, January 10, 2012
Tax Changes for 2012: A Checklist - Part 1 of 3
(Part I of a Three-Part Series)
Welcome 2012! As the new year rolls around, it's always a sure bet that there will be changes to the current tax law and 2012 is no different. From health savings accounts to retirement contributions here's a checklist of tax changes to help you plan the year ahead.
Individuals
The current tax rate structure ranging from 10% to 35% remains the same for 2012, but tax-bracket thresholds increase for each filing status.
Standard deductions and the personal exemption have also been adjusted upward to reflect inflation. For details see Tax Brackets and Exemptions for 2012 below.
Alternate Minimum Tax (AMT)
Alternate Minimum Tax (AMT) limits decrease for all taxpayers at $33,750 for singles, $45,000 for married filing jointly, and $22,500 for married filing separately.
"Kiddie Tax"
For taxable years beginning in 2012, the amount that can be used to reduce the net unearned income reported on the child's return that is subject to the "kiddie tax," is $950. The same $950 amount is used to determine whether a parent may elect to include a child's gross income in the parent's gross income and to calculate the "kiddie tax". For example, one of the requirements for the parental election is that a child's gross income for 2012 must be more than $950 but less than $9,500.
For 2012, the net unearned income for a child under the age of 19 (or a full-time student under the age of 24) that is not subject to "kiddie tax" is $1,900, the same as 2011.
Health Savings Accounts (HSAs)
Contributions to a Health Savings Account (HSA) are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. Medical expenses must not be reimbursable by insurance or other sources and do not qualify for the medical expense deduction on a federal income tax return.
A qualified individual must be covered by a High Deductible Health Plan
(HDHP) and not be covered by other health insurance with the exception of insurance for accidents, disability, dental care, vision care, or long-term care.
For calendar year 2012, a qualifying HDHP must have a deductible of at least $1,200 for self-only coverage or $2,400 for family coverage (unchanged from 2011) and must limit annual out-of-pocket expenses of the beneficiary to $6,050 for self-only coverage (up $100 from 2011) and
$12,100 for family coverage (up $200 from 2011).
Medical Savings Accounts (MSAs)
There are two types of Medical Savings Accounts (MSAs), the Archer MSA created to help self-employed individuals and employees of certain small employers and the Medicare Advantage MSA, which is actually an Archer MSA as well, and is designated by Medicare to be used solely to pay the qualified medical expenses of the account holder. To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare and both MSAs require that you are enrolled in a high deductible health plan (HDHP).
Self-only coverage. For taxable years beginning in 2012, the term "high deductible health plan" means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,100 (up $100 from
2011) and not more than $3,150 (up $150 from 2011), and under which the annual out-of-pocket expenses required to be paid (other than for
premiums) for covered benefits do not exceed $4,200 (up $150 from 2011).
Family coverage. For taxable years beginning in 2012, the term "high deductible health plan" means, for family coverage, a health plan that has an annual deductible that is not less than $4,200 (up $150 from
2011) and not more than $6,300 (up $250 form 2011), and under which the annual out-of-pocket expenses required to be paid (other than for
premiums) for covered benefits do not exceed $7,650 (up $250 from 2011).
Eligible Long-Term Care Premiums
Premiums for long-term care are treated the same as health care premiums and are deductible on your taxes subject to certain limitations. For individuals age 40 or less at the end of 2012, the limitation is $350.
Persons over 40 but less than 50 can deduct $660. Those over age 50 but not more than 60 can deduct $1,310, while individuals over age 60 but younger than 70 can deduct $3,500. The maximum deduction $4,370 and applies to anyone over the age of 70.
Adoption Assistance Programs
For taxable years beginning in 2012, the amount that can be excluded from an employee's gross income for the adoption of a child with special needs is $12,650. In addition, the maximum amount that can be excluded from an employee's gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $12,650 (down from $13,360 in 2011).
The amount excludable from an employee's gross income begins to phase out under for taxpayers with modified adjusted gross income (MAGI) in excess of $189,710 and is completely phased out for taxpayers with modified adjusted gross income of $229,710 or more.
Taxpayers adopting children are eligible for both the adoption credit (see below) and the adoption assistance exclusion of adoption expenses paid for through an employer's adoption assistance plan. However, the same adoption expense cannot qualify for both the adoption credit and the adoption assistance exclusion.
Foreign Earned Income Exclusion
For taxable years beginning in 2012, the foreign earned income exclusion amount is $95,100, up from $92,900 in 2011.
Estate Tax
For an estate of any decedent dying during calendar year 2012, the basic exclusion amount is $5,120,000, up from $5,000,000 in 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011. The maximum tax rate remains at 35%.
While this checklist outlines important tax changes already in place for 2012, additional changes in tax law are more than likely to arise during the year ahead.
Don't hesitate to call us if you want to get an early start on tax planning for 2012. We're here to help!
Watch for Part 2 of this three part series
Welcome 2012! As the new year rolls around, it's always a sure bet that there will be changes to the current tax law and 2012 is no different. From health savings accounts to retirement contributions here's a checklist of tax changes to help you plan the year ahead.
Individuals
The current tax rate structure ranging from 10% to 35% remains the same for 2012, but tax-bracket thresholds increase for each filing status.
Standard deductions and the personal exemption have also been adjusted upward to reflect inflation. For details see Tax Brackets and Exemptions for 2012 below.
Alternate Minimum Tax (AMT)
Alternate Minimum Tax (AMT) limits decrease for all taxpayers at $33,750 for singles, $45,000 for married filing jointly, and $22,500 for married filing separately.
"Kiddie Tax"
For taxable years beginning in 2012, the amount that can be used to reduce the net unearned income reported on the child's return that is subject to the "kiddie tax," is $950. The same $950 amount is used to determine whether a parent may elect to include a child's gross income in the parent's gross income and to calculate the "kiddie tax". For example, one of the requirements for the parental election is that a child's gross income for 2012 must be more than $950 but less than $9,500.
For 2012, the net unearned income for a child under the age of 19 (or a full-time student under the age of 24) that is not subject to "kiddie tax" is $1,900, the same as 2011.
Health Savings Accounts (HSAs)
Contributions to a Health Savings Account (HSA) are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. Medical expenses must not be reimbursable by insurance or other sources and do not qualify for the medical expense deduction on a federal income tax return.
A qualified individual must be covered by a High Deductible Health Plan
(HDHP) and not be covered by other health insurance with the exception of insurance for accidents, disability, dental care, vision care, or long-term care.
For calendar year 2012, a qualifying HDHP must have a deductible of at least $1,200 for self-only coverage or $2,400 for family coverage (unchanged from 2011) and must limit annual out-of-pocket expenses of the beneficiary to $6,050 for self-only coverage (up $100 from 2011) and
$12,100 for family coverage (up $200 from 2011).
Medical Savings Accounts (MSAs)
There are two types of Medical Savings Accounts (MSAs), the Archer MSA created to help self-employed individuals and employees of certain small employers and the Medicare Advantage MSA, which is actually an Archer MSA as well, and is designated by Medicare to be used solely to pay the qualified medical expenses of the account holder. To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare and both MSAs require that you are enrolled in a high deductible health plan (HDHP).
Self-only coverage. For taxable years beginning in 2012, the term "high deductible health plan" means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,100 (up $100 from
2011) and not more than $3,150 (up $150 from 2011), and under which the annual out-of-pocket expenses required to be paid (other than for
premiums) for covered benefits do not exceed $4,200 (up $150 from 2011).
Family coverage. For taxable years beginning in 2012, the term "high deductible health plan" means, for family coverage, a health plan that has an annual deductible that is not less than $4,200 (up $150 from
2011) and not more than $6,300 (up $250 form 2011), and under which the annual out-of-pocket expenses required to be paid (other than for
premiums) for covered benefits do not exceed $7,650 (up $250 from 2011).
Eligible Long-Term Care Premiums
Premiums for long-term care are treated the same as health care premiums and are deductible on your taxes subject to certain limitations. For individuals age 40 or less at the end of 2012, the limitation is $350.
Persons over 40 but less than 50 can deduct $660. Those over age 50 but not more than 60 can deduct $1,310, while individuals over age 60 but younger than 70 can deduct $3,500. The maximum deduction $4,370 and applies to anyone over the age of 70.
Adoption Assistance Programs
For taxable years beginning in 2012, the amount that can be excluded from an employee's gross income for the adoption of a child with special needs is $12,650. In addition, the maximum amount that can be excluded from an employee's gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $12,650 (down from $13,360 in 2011).
The amount excludable from an employee's gross income begins to phase out under for taxpayers with modified adjusted gross income (MAGI) in excess of $189,710 and is completely phased out for taxpayers with modified adjusted gross income of $229,710 or more.
Taxpayers adopting children are eligible for both the adoption credit (see below) and the adoption assistance exclusion of adoption expenses paid for through an employer's adoption assistance plan. However, the same adoption expense cannot qualify for both the adoption credit and the adoption assistance exclusion.
Foreign Earned Income Exclusion
For taxable years beginning in 2012, the foreign earned income exclusion amount is $95,100, up from $92,900 in 2011.
Estate Tax
For an estate of any decedent dying during calendar year 2012, the basic exclusion amount is $5,120,000, up from $5,000,000 in 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011. The maximum tax rate remains at 35%.
While this checklist outlines important tax changes already in place for 2012, additional changes in tax law are more than likely to arise during the year ahead.
Don't hesitate to call us if you want to get an early start on tax planning for 2012. We're here to help!
Watch for Part 2 of this three part series
Tuesday, December 27, 2011
The RI Department of Labor and Training announces Unemployment Insurance and TDI Tax rates for 2012
The RI Department of Labor and Training has announced that the 2012 Unemployment Insurance taxable wage base will be $19,600 for most employers in Rhode Island. This represents a $600 increase from the current year. By law, the Unemployment Insurance taxable wage base represents 46.5 percent of the average annual wage in Rhode Island.
While the wage base limits the amount of wages that are taxable, tax rates for individual employers vary according to their experience with the Unemployment Insurance system. These rates range from a minimum of 1.69 percent to a maximum of 9.79 percent. Employers will be notified of their new individual tax rates in December. The 2012 rate for new employers will be 2.64 percent in 2012, an increase of 0.18 of a percentage point from the 2011 rate for new employers.
The 2012 taxable wage base for those employers in the highest Unemployment Insurance tax rate (9.79%) group will be $21,100-$1,500 greater than the taxable wage base for all other employers, per RI law. This higher wage base, which impacts approximately 19 percent of RI experience-rated employers, is intended to help offset the large drain these employers have on the Employment Security Trust Fund. Last year, 44.5 percent of all Unemployment Insurance benefit payments were attributed to the top 19 percent of RI experience-rated employers.
The tying of the taxable wage base to the average annual RI wage and the increasing of the wage base for employers in the highest tax rate are the result of recent legislative action to help restore solvency to the RI Employment Security Trust Fund.
The Employment Security Fund, financed by assessments from 30,600 private businesses in the state, covers the cost of Unemployment Insurance benefits for RI workers. The fund's taxable wage base represents the maximum amount of an employee's earned wages that are subject to taxation in any given year.
The Department also announced that the employee contribution rate to the Temporary Disability Insurance Fund will drop to 1.2 percent in 2012, a 1/10th of a percentage point decrease from 2011. The contribution rate is calculated by dividing total adjusted fund disbursements for a 12-month period by taxable wages for a 12-month period.
Also in 2012, the TDI taxable wage base will be $60,000, an increase of $1,600 over last year's taxable wage base. The maximum TDI contribution will be $720.00 next year, a decrease of $39.20 from the 2011 maximum contribution of $759.20.
Temporary Disability Insurance provides benefit payments to insured RI workers for weeks of unemployment caused by disability. Last year, approximately 391,500 workers contributed to the TDI fund.
As always, should you have any questions, please feel free to contact your trusted advisor at DiSanto Priest & Co.
401.921.2000
While the wage base limits the amount of wages that are taxable, tax rates for individual employers vary according to their experience with the Unemployment Insurance system. These rates range from a minimum of 1.69 percent to a maximum of 9.79 percent. Employers will be notified of their new individual tax rates in December. The 2012 rate for new employers will be 2.64 percent in 2012, an increase of 0.18 of a percentage point from the 2011 rate for new employers.
The 2012 taxable wage base for those employers in the highest Unemployment Insurance tax rate (9.79%) group will be $21,100-$1,500 greater than the taxable wage base for all other employers, per RI law. This higher wage base, which impacts approximately 19 percent of RI experience-rated employers, is intended to help offset the large drain these employers have on the Employment Security Trust Fund. Last year, 44.5 percent of all Unemployment Insurance benefit payments were attributed to the top 19 percent of RI experience-rated employers.
The tying of the taxable wage base to the average annual RI wage and the increasing of the wage base for employers in the highest tax rate are the result of recent legislative action to help restore solvency to the RI Employment Security Trust Fund.
The Employment Security Fund, financed by assessments from 30,600 private businesses in the state, covers the cost of Unemployment Insurance benefits for RI workers. The fund's taxable wage base represents the maximum amount of an employee's earned wages that are subject to taxation in any given year.
The Department also announced that the employee contribution rate to the Temporary Disability Insurance Fund will drop to 1.2 percent in 2012, a 1/10th of a percentage point decrease from 2011. The contribution rate is calculated by dividing total adjusted fund disbursements for a 12-month period by taxable wages for a 12-month period.
Also in 2012, the TDI taxable wage base will be $60,000, an increase of $1,600 over last year's taxable wage base. The maximum TDI contribution will be $720.00 next year, a decrease of $39.20 from the 2011 maximum contribution of $759.20.
Temporary Disability Insurance provides benefit payments to insured RI workers for weeks of unemployment caused by disability. Last year, approximately 391,500 workers contributed to the TDI fund.
As always, should you have any questions, please feel free to contact your trusted advisor at DiSanto Priest & Co.
401.921.2000
Tuesday, December 6, 2011
Your Pension Plan - Inflation Adjustments for 2012
For 2012, there are a few cost of living adjustments for pension plans and other retirement-related items. Check out what to expect in the new year....
· The contribution limit for employees who participate in section 401(k), 403(b), or 457(b) plans, and the federal government's Thrift Savings Plan, increases to $17,000 in 2012, from $16,500 in prior years.
· The catch-up contribution limit in those plans for those aged 50 and over remains unchanged, at $5,500.
IRA contributions and catch up limits remain unchanged for 2012 at $5,000 and $1,000 respectively.
· The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are active participants in an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000-$66,000 in 2011.
· For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000. For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple's income is between $173,000 and $183,000 in 2012, up from $169,000 and $179,000 in 2011.
· The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to 183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011. For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000. For a married individual filing a separate return who is an active participant in an employer-sponsored retirement plan, the phase-out range remains $0 to $10,000.
· The AGI limit for the saver's credit (also known as the retirement savings contributions credit) for low- and moderate-income workers is $57,500 for married couples filing jointly, up from $56,500 in 2011; $43,125 for heads of household, up from $42,375; and $28,750 for married individuals filing separately and for singles, up from $28,250.
As always, should you have any questions, please feel free to contact your trusted avisor at DiSanto, Priest & Co. 401.921.2000
· The contribution limit for employees who participate in section 401(k), 403(b), or 457(b) plans, and the federal government's Thrift Savings Plan, increases to $17,000 in 2012, from $16,500 in prior years.
· The catch-up contribution limit in those plans for those aged 50 and over remains unchanged, at $5,500.
IRA contributions and catch up limits remain unchanged for 2012 at $5,000 and $1,000 respectively.
· The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are active participants in an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000-$66,000 in 2011.
· For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000. For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple's income is between $173,000 and $183,000 in 2012, up from $169,000 and $179,000 in 2011.
· The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to 183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011. For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000. For a married individual filing a separate return who is an active participant in an employer-sponsored retirement plan, the phase-out range remains $0 to $10,000.
· The AGI limit for the saver's credit (also known as the retirement savings contributions credit) for low- and moderate-income workers is $57,500 for married couples filing jointly, up from $56,500 in 2011; $43,125 for heads of household, up from $42,375; and $28,750 for married individuals filing separately and for singles, up from $28,250.
As always, should you have any questions, please feel free to contact your trusted avisor at DiSanto, Priest & Co. 401.921.2000
Friday, November 18, 2011
More Year-End Tax Tips To Take Advantage Of
Partnership or S Corporation Basis. Partners or S corporation shareholders in entities that have a loss for 2011 can deduct that loss only up to their basis in the entity. However, they can take steps to increase their basis to allow a larger deduction. Basis in the entity can be increased by lending the entity money or making a capital contribution by the end of the entity's tax year. Caution: Remember that by increasing basis, you're putting more of your funds at risk. Consider whether the loss signals further troubles ahead.
Retirement Plans. Self-employed individuals who have not yet done so should set up self-employed retirement plans before the end of 2011. Call us today if you need help setting up a retirement plan.
Dividend Planning. Reduce accumulated corporate profits and earnings by issuing corporate dividends to shareholders, which continue to be taxed at the 15 percent rate through 2012.
Budgets. Every business, whether small or large should have a budget. The need for a business budget may seem obvious, but many companies overlook this critical business planning tool. A budget is extremely effective in making sure your business has adequate cash flow and in ensuring financial success. Once the budget has been created, then monthly actual revenue amounts can be compared to monthly budgeted amounts. If actual revenues fall short of budgeted revenues, expenses must generally be cut. Tip: Year-end is the best time for business owners to meet with their accountants to budget revenues and expenses for the following year.
Call Us First
These are just a few of the year-end planning tax moves that could make a substantial difference in your tax bill for 2011. But the best advice we can give you is to give us a call. We'll sit down with you, discuss your specific tax and financial needs, and develop a plan that works for your business.
Retirement Plans. Self-employed individuals who have not yet done so should set up self-employed retirement plans before the end of 2011. Call us today if you need help setting up a retirement plan.
Dividend Planning. Reduce accumulated corporate profits and earnings by issuing corporate dividends to shareholders, which continue to be taxed at the 15 percent rate through 2012.
Budgets. Every business, whether small or large should have a budget. The need for a business budget may seem obvious, but many companies overlook this critical business planning tool. A budget is extremely effective in making sure your business has adequate cash flow and in ensuring financial success. Once the budget has been created, then monthly actual revenue amounts can be compared to monthly budgeted amounts. If actual revenues fall short of budgeted revenues, expenses must generally be cut. Tip: Year-end is the best time for business owners to meet with their accountants to budget revenues and expenses for the following year.
Call Us First
These are just a few of the year-end planning tax moves that could make a substantial difference in your tax bill for 2011. But the best advice we can give you is to give us a call. We'll sit down with you, discuss your specific tax and financial needs, and develop a plan that works for your business.
Wednesday, November 9, 2011
Year-End Tax Planning for Businesses
There are a number of end of year tax strategies businesses can use to reduce their tax burden for 2011. Here's the lowdown on some of the best options.
In other words, in 2011 businesses can elect to expense (deduct immediately) the entire cost of most new equipment up to $500,000 (subject to a dollar-for-dollar reduction in that $500,000 for property placed in service that exceeds the maximum amount of $2,000,000).
Qualified property is defined as property that you placed in service during the tax year and used predominantly (more than 50 percent) in your trade or business. Property that is placed in service and then disposed of in that same tax year does not qualify, nor does property converted to personal use in the same tax year it is acquired.
Timing. If you plan to purchase business equipment this year, consider the timing. You might be able to increase your tax benefit if you buy equipment at the right time. Here's a simplified explanation:
Conventions. The tax rules for depreciation include "conventions" or rules for figuring out how many months of depreciation you can claim. There are three types of conventions. To select the correct convention, you must know the type of property and when you placed the property in service.
Purchase New Business Equipment
Section 179 Expensing. Business should take advantage of Section 179 expensing this year for a couple of reasons. First, is that starting in tax year 2010 and continuing into tax year 2011, the maximum Section 179 expense deduction for equipment purchases increased to $500,000 ($535,000 for qualified enterprise zone property) and the bonus depreciation increased to 100% for qualified property. Beginning in tax year 2012 however, the Section 179 deduction is scheduled to drop to $125,000 and the bonus depreciation to be reduced to 50 percent and then be phased out completely.In other words, in 2011 businesses can elect to expense (deduct immediately) the entire cost of most new equipment up to $500,000 (subject to a dollar-for-dollar reduction in that $500,000 for property placed in service that exceeds the maximum amount of $2,000,000).
Qualified property is defined as property that you placed in service during the tax year and used predominantly (more than 50 percent) in your trade or business. Property that is placed in service and then disposed of in that same tax year does not qualify, nor does property converted to personal use in the same tax year it is acquired.
Note: Many states have not matched these amounts and, therefore, state tax may not allow for the maximum federal deduction. In this case, two sets of depreciation records will be needed to track the federal and state tax impact.Please contact our office if you have any questions regarding qualified property and bonus depreciation.
Timing. If you plan to purchase business equipment this year, consider the timing. You might be able to increase your tax benefit if you buy equipment at the right time. Here's a simplified explanation:
Conventions. The tax rules for depreciation include "conventions" or rules for figuring out how many months of depreciation you can claim. There are three types of conventions. To select the correct convention, you must know the type of property and when you placed the property in service.
1. The half-year convention: This convention applies to all property except residential rental property, nonresidential real property, and railroad gradings and tunnel bores (see mid-month convention below) unless the mid-quarter convention applies. All property that you begin using during the year is treated as "placed in service" (or "disposed of") at the midpoint of the year. This means that no matter when you begin using (or dispose of) the property, you treat it as if you began using it in the middle of the year.
Example: You buy a $40,000 piece of machinery on December 15. If the half-year convention applies, you get one-half year of depreciation on that machine.
2. The mid-quarter convention: The mid-quarter convention must be used if the cost of equipment placed in service during the last three months of the tax year is more than 40% of the total cost of all property placed in service for the entire year. If the mid-quarter convention applies, the half-year rule does not apply, and you treat all equipment placed in service during the year as if it were placed in service at the midpoint of the quarter in which you began using it.
3. The mid-month convention: This convention applies only to residential rental property, nonresidential real property, and railroad gradings and tunnel bores. It treats all property placed in service (or disposed of) during any month as placed in service (or disposed of) on the midpoint of that month.
If you're planning on buying equipment for your business, call us first. We'll help you figure out the best time to buy it to take full advantage of these tax rules.
Call Us First
These are just a few of the year-end planning tax moves that could make a substantial difference in your tax bill for 2011. But the best advice we can give you is to give us a call at 401-921-2000. We'll sit down with you, discuss your specific tax and financial needs, and develop a plan that works for your business.
Subscribe to:
Posts (Atom)