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2010 Tax Planning Seminar. Presented by. Your Firm Name. The clock is ticking on savings …. Tax Rate Forecast. Tax Credits and Deductions. Credits: reduce tax dollar for dollar Deductions: lower your taxable income. 2010 Child Tax Credit $1,000 per child. Education Credits.

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2010 tax planning seminar

2010 Tax Planning Seminar

Presented by

Your Firm Name

tax credits and deductions
Tax Credits and Deductions

Credits: reduce tax dollar for dollar

Deductions: lower your taxable income

education credits
Education Credits

Hope Scholarship Credit

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

Lifetime Learning Credit = $2,000 maximum

making work pay credit
Making Work Pay Credit

A 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 deduction
Standard Deduction
  • Single Filers: $5,700
  • Joint Filers: $11,400
  • Married Filing Separately: $5,700
  • Head of Household: $8,400
itemized deductions reduce taxable income
Itemized Deductions Reduce Taxable Income
  • Medical expenses
  • Nonbusiness taxes
  • Interest expenses
  • Investment expenses
  • Professional fees
  • Charitable contributions
donating to charity
Donating to Charity?
  • Donations of cash or property to qualified charities are deductible.
  • Charitable donations are limited to 50% of your adjusted gross income.
  • Deductions for vehicle donations are limited for vehicles worth more than $500.
health insurance
Health Insurance
  • Individual Coverage Mandate begins in 2014.
  • Subsidies will be provided for the uninsured.
  • New taxes will be levied to cover the costs of subsidies..
employer sponsored plans
Employer-Sponsored Plans
  • Defined Benefit Plans
  • Defined Contribution Plans
401 k contribution limits 2010
401(k) Contribution Limits 2010

Under Age 50: $16,500

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

the roth 401 k
The Roth 401(k)
  • Contributions are made with after-tax dollars.
  • Earnings grow tax free.
  • Distributions are tax free in retirement.
roth iras
Roth IRAs
  • Make contributions with after-tax dollars
  • Receive tax-free distributions
roth ira conversions
Roth IRA Conversions

Income limits on conversions have

been eliminated in 2010.

You will be taxed on the conversion amount.

You will not owe a penalty

tax tip
Tax Tip:

IRA savings can be used without penalty for qualified college expenses or to help pay for your first home.

capital gains tax rates
Capital Gains Tax Rates
  • 15% for investors in the top four brackets
  • Zero tax through 2010 for investors in the 10% and 15% brackets
slide26

Capital 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 unchanged
Other Gains Rates Unchanged

Collectibles 28%

Real estate depreciation recapture 25%

amt danger zones
AMT Danger Zones
  • Large capital gains
  • Numerous dependency exemptions
  • Large state income tax deductions
  • Large deductions for unreimbursed employee business expenses or miscellaneous expenses
  • Substantial medical expenses
  • Incentive stock options
2010 amt exemption amounts
2010 AMT Exemption Amounts

(without further reform)

  • $45,000 for joint filers, down from $70,950 in 2009
  • $33,750 for single filers, down from $46,700 in 2009
tax tip31
Tax Tip:

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

dividend tax rates
Dividend Tax Rates
  • 15% for investors in the top four brackets
  • Zero tax through 2010 for investors in the 10% and 15% brackets
dividend vs ordinary income
Dividend vs. Ordinary Income

Ordinary income rates 10% – 35%

Dividend rates 0% – 15%

Rates apply for both regular tax and AMT.

qualifying dividends
Qualifying Dividends
  • Domestic corporations
  • Certain foreign corporations
  • Certain mutual fund dividends
non qualifying dividends
Non-Qualifying Dividends
  • Retirement plans or IRAs
  • Mutual fund interest and short-term gains
  • Money market interest
  • S corporation distributions
15 dividends cannot offset investment interest expense
15% dividends cannot offset investment interest expense.

15% dividends also cannot offset capital losses.

slide37

Ordinary Income Interest

15% Dividends

vs.

slide38

No 15% rate for dividends in retirement plans

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

slide39

Not all stocks are created equal.

  • Some stocks do not pay dividends.
  • Choose investments that make sense for you.
slide40

Current Income

Capital Appreciation

vs.

Focus on Total Return

slide41

Sell appreciated stock anduse the proceeds to…

  • Buy dividend-paying stock
  • Diversify investment holdings
  • Change asset allocations
what is
What is…

?

Long-Term

tax goals vs investing goals
Tax Goals vs. Investing Goals

Always consider:

  • Portfolio balance
  • Risk tolerance
  • An investment’s impact on your situation
slide44

Plan around the “Kiddie Tax”

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

slide45

Good News for Business Owners

  • Tax incentives for hiring and retaining workers
  • Tax breaks for providing health insurance
  • Increased Section 179 expensing
hiring incentives
Hiring Incentives
  • New Hires: Social Security tax liability is waived through December 31, 2010.
  • Retained Hires: A $1,000 credit for each qualified new hire who is retained for one year.
slide47
Available through 2011

Eligibility expanded through 2010

Work Opportunity Tax Credit (WOTC)

green business tax breaks
“Green” Business Tax Breaks
  • Deduction for energy-saving improvements
  • Renewable energy production credits:
    • Solar
    • Biomass
    • Geothermal
    • Wind
health insurance reform
Health Insurance Reform
  • No employer requirement
  • “Pay or Play” rules starting in 2014
  • Tax Credit for premiums in 2010
section 199 domestic manufacturing deduction
Section 199 Domestic Manufacturing Deduction
  • 9% of QPAI in 2010
  • 50% of wages apply
section 179 expensing 2010
Section 179 Expensing 2010

Expense allowance $250,000

Phaseout threshold $800,000

slide53

Plan Your Asset Purchases Wisely

Make large purchases before 2011

slide55

$

Cost Segregation Nets $$$

slide56

Cost Segregation

Shorter Lives = Quicker Write-Offs

slide57

Capital Gains Tips for Businesses

  • Holding period
  • Character of assets
slide58

Installment Sales

  • The 15% capital gains rate is good through 2010.
  • Beyond 2010, plan for the increased tax rate when negotiating sales.
slide59

Tax-Deferred vs. Taxable

Reconsider Tax-Deferral Techniques

business structure
Business Structure

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

slide61

Take Out Earnings Prior to Making an “S” Election

  • Take advantage of capital gain rates
  • Reduce passive income concerns
  • Reduce C corporation earnings concerns
s corporations
S Corporations
  • Permissible number of shareholders is 100.
  • Eligible members of the same family may be treated as a single shareholder.
slide63

Closely Held Companies

  • Shift appreciation
  • Shift income
  • Pay tax at a reduced rate
plan for business continuation
Plan for Business Continuation
  • Transfer control according to your wishes
  • Minimize your tax liabilities
  • Fund your retirement
  • Preserve wealth for your family
slide65

The Benefits of Estate Planning

  • Preserve assets
  • Minimize taxes
  • Distribute property
why plan
Why Plan?
  • 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 legal and financial problems for your heirs.
gifting your way to savings
“Gifting” Your Way to Savings
  • You can make tax-free gifts of up to $13,000 per person, per year.
  • 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 to educational institutions and medical providers.
gifting advantages
Gifting Advantages
  • 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.
commonly used trusts
Commonly Used Trusts
  • Credit Shelter or Bypass Trust
  • Dynasty Trust
  • Irrevocable Life Insurance Trust
  • Charitable Remainder Trust
  • Qualified Terminable Interest Property Trust
plan to save
Plan to Save!

We can help you monitor changing tax laws and update your strategies accordingly.

2010 tax planning seminar75

2010 Tax Planning Seminar

Presented by

Your Firm Name

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