Newsletter | December

All of us at Roth CPA & Associates hope you have a Wonderful Holiday Season! 

Following are some year end tax saving strategies you should consider.  There is no “one size fits all” tax strategy so please give us a call to discuss your individual situation. 

Individual Tax Planning Ideas: 

Stock and Bond Sales – Consider not selling stocks with a gain until January to defer income recognition. Likewise, sell those stocks with losses before the end of the year to recognize the loss and reduce any other gains you may have.

Estimated Tax Payments – Consider the status of any estimated tax payment requirements to avoid late and underpayment penalties. Accelerate your payment of city and state estimated income taxes to take advantage of deducting them in 2009.

Charitable Donations – Make charitable donations with appreciated stock owned more than one year. The fair market value is used to measure the deductable donation, and there is no tax on the difference between your cost and the fair market value. If the fair market value is less than your cost, consider selling the item to recognize the loss and contribute the cash proceeds. Deductions for charitable contribution are no longer allowed without a receipt.

Gift Tax – If you are married, both you and your spouse can give separate gifts of up to the annual limit of $13,000 to the same person without making the gift taxable.

Retirement Contributions – Make the maximum contribution to retirement arrangements whether through employer sponsored plans or an IRA.  The maximum IRA contribution is $5,000 in 2009 plus a $1,000 catch up if you are 50 years old or over.

Flexible Spending Accounts – Make sure that your account balances are completely used for 2009.

‘Kiddie Tax’ – A dependent child under age 19 (or age 24 if a full-time student) may be subject to tax at the parents’ higher marginal rate on unearned income in excess of $1,900.

Energy Savings Tax Credits – You can receive a 30% credit up to $1,500 for qualified Heating, Venting, Air Conditioning Systems, Insulation, Roofs, Water Heaters, and Windows and Doors.  You receive a 30% credit with no limit on qualified Geothermal Heat Pumps, Small Wind Turbines, and Solar Energy Systems.

Hybrid Vehicle – If you purchase a qualified hybrid motor vehicle in 2009, you may get a tax credit.

New Vehicle Sales Tax Deduction – You can deduct the sales tax you paid on the purchase of a new vehicle between February 17, 2009 and December 31, 2009

Minimum Distribution Requirements - These are waived for Individual Retirement Accounts in 2009. 

Business Tax Planning Ideas: 

Deferring Taxes - An important component of tax planning is the timing of income and deductions. The objective is to minimize your current year tax liability by accelerating deductions and postponing the recognition of income. We almost always advocate deferring taxes when possible (even if you expect tax rates to go up) due to future uncertainty and the time value of money.

Deductible Expenses – Charge deductible expenditures on credit cards to get a current deduction even if payment of the charge will not be made until next year.

Installment Sales – Consider an installment sale of property rather than collecting all proceeds this year. You can defer part of the gain on the sale until you collect the cash.

Deferring Revenue – For cash-basis businesses, send out invoices late in December so that collections will not be made until January.

New Equipment – Purchase new business equipment before the end of the year to take advantage of the immediate deduction of up to $250,000.