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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 l.jpg

2010 Tax Planning Seminar

Presented by

Your Firm Name

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Tax Credits and Deductions

Credits: reduce tax dollar for dollar

Deductions: lower your taxable income

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2010 Child Tax Credit$1,000 per child

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Education Credits

Hope Scholarship Credit

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

Lifetime Learning Credit = $2,000 maximum

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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

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Standard Deduction

  • Single Filers: $5,700

  • Joint Filers: $11,400

  • Married Filing Separately: $5,700

  • Head of Household: $8,400

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Itemized Deductions Reduce Taxable Income

  • Medical expenses

  • Nonbusiness taxes

  • Interest expenses

  • Investment expenses

  • Professional fees

  • Charitable contributions

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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.

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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..

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Employer-Sponsored Plans

  • Defined Benefit Plans

  • Defined Contribution Plans

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401(k) Contribution Limits 2010

Under Age 50: $16,500

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

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The Roth 401(k)

  • Contributions are made with after-tax dollars.

  • Earnings grow tax free.

  • Distributions are tax free in retirement.

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How much of your incomewill you need in retirement?

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Roth IRAs

  • Make contributions with after-tax dollars

  • Receive tax-free distributions

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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

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Tax Tip:

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

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Which IRA Is Best for You?Roth vs. Traditional

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Taxes Reduced for Capital Gains and Dividends through 2010

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Capital Gains Tax Rates

  • 15% for investors in the top four brackets

  • Zero tax through 2010 for investors in the 10% and 15% brackets

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No Tax Relief for Short-Term Gains!

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Capital Gains Advantage

Gain Tax Net Cash

11 months $50,000 $17,500 $32,500

12 months $40,000 $ 6,000 $34,000

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Other Gains Rates Unchanged

Collectibles 28%

Real estate depreciation recapture 25%

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Large Gains Can Trigger the AMT

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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

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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

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Tax Tip:

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

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Dividend Tax Rates

  • 15% for investors in the top four brackets

  • Zero tax through 2010 for investors in the 10% and 15% brackets

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Dividend vs. Ordinary Income

Ordinary income rates 10% – 35%

Dividend rates 0% – 15%

Rates apply for both regular tax and AMT.

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Qualifying Dividends

  • Domestic corporations

  • Certain foreign corporations

  • Certain mutual fund dividends

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Non-Qualifying Dividends

  • Retirement plans or IRAs

  • Mutual fund interest and short-term gains

  • Money market interest

  • S corporation distributions

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15% dividends cannot offset investment interest expense.

15% dividends also cannot offset capital losses.

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Ordinary Income Interest

15% Dividends


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No 15% rate for dividends in retirement plans

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

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  • Not all stocks are created equal.

  • Some stocks do not pay dividends.

  • Choose investments that make sense for you.

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Current Income

Capital Appreciation


Focus on Total Return

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Sell appreciated stock anduse the proceeds to…

  • Buy dividend-paying stock

  • Diversify investment holdings

  • Change asset allocations

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What is…



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Tax Goals vs. Investing Goals

Always consider:

  • Portfolio balance

  • Risk tolerance

  • An investment’s impact on your situation

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Plan around the “Kiddie Tax”

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

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Good News for Business Owners

  • Tax incentives for hiring and retaining workers

  • Tax breaks for providing health insurance

  • Increased Section 179 expensing

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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.

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Available through 2011

Eligibility expanded through 2010

Work Opportunity Tax Credit (WOTC)

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“Green” Business Tax Breaks

  • Deduction for energy-saving improvements

  • Renewable energy production credits:

    • Solar

    • Biomass

    • Geothermal

    • Wind

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Health Insurance Reform

  • No employer requirement

  • “Pay or Play” rules starting in 2014

  • Tax Credit for premiums in 2010

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Section 199 Domestic Manufacturing Deduction

  • 9% of QPAI in 2010

  • 50% of wages apply

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Section 179 Expensing 2010

Expense allowance $250,000

Phaseout threshold $800,000

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Deduct $25,000 for Heavy SUVs or Trucks

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Plan Your Asset Purchases Wisely

Make large purchases before 2011

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Don’t forget about depreciation recapture


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Cost Segregation Nets $$$

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Cost Segregation

Shorter Lives = Quicker Write-Offs

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Capital Gains Tips for Businesses

  • Holding period

  • Character of assets

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Installment Sales

  • The 15% capital gains rate is good through 2010.

  • Beyond 2010, plan for the increased tax rate when negotiating sales.

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Tax-Deferred vs. Taxable

Reconsider Tax-Deferral Techniques

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Business Structure

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

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Take Out Earnings Prior to Making an “S” Election

  • Take advantage of capital gain rates

  • Reduce passive income concerns

  • Reduce C corporation earnings concerns

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S Corporations

  • Permissible number of shareholders is 100.

  • Eligible members of the same family may be treated as a single shareholder.

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Closely Held Companies

  • Shift appreciation

  • Shift income

  • Pay tax at a reduced rate

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Plan for Business Continuation

  • Transfer control according to your wishes

  • Minimize your tax liabilities

  • Fund your retirement

  • Preserve wealth for your family

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The Benefits of Estate Planning

  • Preserve assets

  • Minimize taxes

  • Distribute property

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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.

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Carryover Basis Rules Take Effect with Estate Tax Repeal!

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“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.

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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.

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Beware of the Generation-Skipping Transfer Tax!

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Commonly Used Trusts

  • Credit Shelter or Bypass Trust

  • Dynasty Trust

  • Irrevocable Life Insurance Trust

  • Charitable Remainder Trust

  • Qualified Terminable Interest Property Trust

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Wondering how to pay estate taxes?ConsiderLife Insurance


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Plan to Save!

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

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2010 Tax Planning Seminar

Presented by

Your Firm Name