Tax Saving Strategies for the 2012 Filing Season

1. Tax Saving Strategiesfor the 2012 Filing Season Updated Dec.12, 2011

2. Select 2011 Tax Law Changes • 2011 tax changes less drastic than 2010 • One wide-ranging change – replacement of Making Work Pay Credit

3. Expiring Provisions • Increased Alternative Minimum Tax (AMT) Exemption Amounts • State/Local Sales Tax Deduction • Mortgage Insurance Premiums Deduction • School Teacher Expenses • Qualified Charitable Distributions from IRAs

4. Standard Deduction Standard Deduction Additions Itemizing Deductions Charitable Deductions Alternative Minimum Tax (AMT) AMT Exemption Amounts The Basics

5. Standard Deduction

6. Additional standard deduction for taxpayers age 65 and older or blind: $1,450 (single or head of household) $1,150 (married filing jointly, married filing separately or qualifying widow/er) Standard Deduction Additions

7. Alternative to standard deduction Use when total itemized deductions exceed standard deduction Wide range of itemized deductions No phaseout rules Bunching tax breaks AMT consideration Benefits of advance planning Itemizing Deductions

8. Qualified donations only Deductible up to 50% of AGI (for itemizers) Documentation requirements Donations of more than $75 and $250 or more (additional substantiation rules) Donations of appreciated property Clothing, household items and automobiles (requirements and substantiation rules) Charitable Deductions

9. Alternative Minimum Tax (AMT) • Additional tax for certain taxpayers • AMT triggers: • Higher-than-average dependency exemptions • Large deductions for state and local income taxes • High real estate taxes • Miscellaneous itemized deductions and medical expenses

10. AMT Exemption Amounts • Exemption amounts:  • Single $48,450 • Married/Filing jointly $74,450 • Phaseout when AMT income exceeds:  • $112,500 (single) • $150,000 (married filing jointly)

11. Family Education Job Home Investments Retirement Tax Strategies & Incentives

12. Kiddie Tax Child Tax Credit Adoption Credit Health Savings Accounts Health Flexible Spending Arrangements Dependent Care Tax Credit Long-term Care Premium Shifting Income Family Tax Incentives

13. Income shifting to children less beneficial $1,900 investment income threshold Exception if parents deceased Applies to: All children younger than age 18 Most children who are age 18 Most full-time students between ages 19-23 Child who is married filing separately Kiddie Tax

14. $1,000 credit per qualifying child Child: Under age 17 Qualified dependent U.S. citizen, resident or national Child Tax Credit

15. Up to $13,360 per eligible child Employer reimbursement of up to $13,360 Different rules for U.S. and foreign adoptions Special-needs child – full credit regardless of actual expenses Adoption Credit

16. Health Savings Accounts • Individuals covered • Tax advantages – contributions, earnings and withdrawals • Consequences of non-qualified withdrawals

17. Health Flexible Spending Arrangements • Tax-free contributions from wages • Fully accessible for qualified medical expenses • Wide range of reimbursable medical expenses (non-prescription drugs, except insulin, not reimbursable in 2011) • Terms and limits determined by company plan • Use or lose feature

18. Dependent Care Tax Credit • Child must be under age 13 and a dependent • 20% to 35% of qualifying expenses (up to $2,100) • AGI factor • Earned income requirement and joint return if married • Up to $3,000 of expenses ($6,000 if two or more dependents) • Reduced by certain employer-provided day care ($5,000/$2,500 limits) • Applicable to other dependents

19. Long-term Care Premium • Tax deduction for portion of insurance costs • Age-based deduction amounts:  • Age 40 or under - $340 • Age 41 to 50 - $640 • Age 51 to 60 - $1,270 • Age 61 to 70 - $3,390 • Age 71 or over - $4,240

20. Shifting Income • Kiddie tax • Gift tax: • Up to $13,000 not subject to gift tax ($26,000 if election by spouse/use other spouse’s exclusion) • Cash gifts and present interests in property requirement • Family business (hiring your minor children): • Legitimate work, adherence to rules/laws and reasonable wages • Social Security and Medicare tax advantages if under age18 • Kiddie Tax not applicable

21. Education Strategies • Tax Credits • American Opportunity Tax Credit • Lifetime Learning Credit • Student Loan Deduction • Higher Education Tuition and Fees Deduction • Qualified Tuition Programs (529 Plans) • Prepaid Tuition Plans • U.S. Savings Bonds

22. American Opportunity Tax Credit and Lifetime Learning Credit Credit vs. deduction Mutually exclusive credits in certain circumstances Tax Credits

23. American Opportunity Tax Credit • Applies to first four years of college/postsecondary school • Recognized educational credential requirement • $2,500 per student per year maximum • Qualified tuition and related expenses • Allowed against AMT *MAGI

24. Lifetime Learning Credit • Worth up to $2,000 per year • Not limited to any number of years • Applies to undergraduate, graduate and professional-degree expenses • Available to each taxpayer – not each student • No educational-credential requirement *Pertains to MAGI

25. Deduct loan interest up to $2,500 No limit on repayment period No need to itemize Qualification requirements Phaseout ranges apply Student Loan Deduction

26. Up to $2,000 or $4,000 deduction Available every qualifying year Covered expenses similar to American Opportunity Tax Credit and Lifetime Learning Credit Broad availability Barred in certain circumstances Phaseout ranges apply Higher Education Tuition and Fees Deduction *MAGI

27. Tax-advantaged way to save for college expenses Money in plan grows tax free Tax-free qualified withdrawals State income tax breaks in certain circumstances Wide range of qualified expenses (no dollar limit) Gifts from family members Qualified Tuition Programs (529 Plans)

28. State-instituted plans Plan inception date and child’s age key factors to amount contributed Tuition costs covered — not room, board or books In-state vs. out-of-state school Tax treatment similar to 529 Plan Prepaid Tuition Plans

29. Tax benefits for qualified higher-education expenses No dollar limit on exclusion Series EE bonds (issued after 1989) and Series I bonds U.S. Savings Bonds

30. Job Strategies • Unreimbursed employment-related costs • Deduction – greater than 2% of AGI • Job search expenses • Line-of-work requirement • Possible disallowance if long-term unemployment period • Not applicable to first job

31. Homeowner Strategies • Deductions • Selling Your Home • First-time Homebuyer Credit • Home Energy Incentives

32. Deductions • Mortgage interest: • Deduct up to $1 million of home-acquisition loans • Deduct up to $100,000 of home-equity loans • No restrictions on use of proceeds • Special rules on deducting points • Real estate taxes: • No limits on number of homes or dollar amount • Prepay/delay decision

33. Exclude up to $250,000 in capital gains ($500,000 if married filing jointly or surviving spouse in certain cases) Home owned/used as principal residence at least two (aggregate) of five years preceding sale Temporary absences from residence Special rules for specific homeowners Repay/recapture First-time Homebuyer Credit Selling Your Home

34. First-time Homebuyer Credit • Limited credit for 2011 home purchases • Credit repayment for some home purchasers

35. Home Energy Incentives • Nonbusiness Energy Property Credit • 10% and 100% credits for certain improvements and expenditures • Dollar limits for specific types of property • $500 maximum lifetime credit • Wide range of improvements • Residential Energy Efficient Property Credit • Wide range of costs • Two types of 30% credits • Dollar limit, principal residence and kilowatt-capacity considerations

36. Dividends Capital Gains Tax Offset Capital Gains with Losses Investment Strategies

37. Top tax rate of 15% for qualified dividends 0% for taxpayers in 10% or 15% tax bracket Dividends

38. 15% maximum tax rate on net capital gains 0% for taxpayers in 10% or 15% income tax bracket Asset must be held more than one year before sale Capital Gains Tax

39. Capital losses netted against capital gains $3,000 in capital losses can be deducted against ordinary income Ability to carry losses forward Keep track of losses – unused, and short and long term Beware of wash sale rule Offset Capital Gains with Losses

40. Employer Sponsored Plans Individual Retirement Accounts (IRAs) Conversion to Roth IRA Retirement Strategies

41. Pre-tax contributions help reduce tax bill Employer matches and earned income – tax deferred $16,500 maximum contribution (younger than age 50) $5,500 additional catch-up contribution (age 50 or older) Employer Sponsored Plans

42. Two types: Traditional and Roth $5,000 maximum annual contribution for either $1,000 additional catch-up contribution (age 50 or older) Contribution restrictions Traditional IRA: deductible contributions – modified AGI and employer-sponsored plan considerations & distribution requirements Roth IRA: nondeductible contributions and tax-free withdrawals Tax-free earnings until distribution Open/contribution deadline: April 17, 2012 Individual Retirement Accounts (IRAs)

43. Conversion to Roth IRA • No dollar limit on conversion amount • Conversion results in taxable income • No early-distribution penalty under certain conditions • No modified AGI requirement • Opportunity to reverse conversion

44. Partner with your CPA Ask questions when considering advice Plan for tax savings year-round Key Takeaways

45. Thank you