Year-End Tax Planning
Year-end tax planning is especially challenging this year because of uncertainty over whether Congress will enact sweeping tax reform that could have a major impact in 2012 and beyond. And even if there's no major tax legislation in the immediate future, Congress next year still will have to grapple with a host of thorny issues, such as whether to once again “patch” the alternative minimum tax (e.g., to avoid a drastic drop in post-2011 exemption amounts), and what to do about the post-2012 expiration of the Bush-era income tax cuts (including the current rate schedules, and low tax rates for long-term capital gains and qualified dividends), and the expiration of favorable estate and gift rules for estates of decedents dying, gifts made, or generation-skipping transfers made after Dec. 31, 2012.
Regardless of what Congress does late this year or early the next, there are solid tax savings to be realized by taking advantage of tax breaks that are on the books for 2011 but may be gone next year unless they are extended by Congress.
For individuals, these include the option to deduct state and local sales and use taxes instead of state and local income taxes; the above-the-line deduction for qualified higher education expenses; and tax-free distributions by those age 70 1/2 or older from IRAs for charitable purposes.
For businesses, tax breaks that are available through the end of this year but won't be around next year unless Congress acts include: 100% bonus first year depreciation for most new machinery, equipment and software; an extraordinarily high $500,000 expensing limitation (and within that dollar limit, $250,000 of expensing for qualified real property); and the research tax credit.
We have compiled a checklist of actions based on current tax rules that may help you save tax dollars if you act before year-end. Not all actions will apply in your particular situation, but you will likely benefit from many of them. Please click here for the full article, including checklists of suggested year-end tax planning moves for individuals and businesses.
These are just some of the year-end steps that can be taken to save taxes, so talk to your CPA or tax advisor. For more advice regarding this or any other tax related question, please contact:
J. Timothy Maximoff, Chair
jtm@hogefenton.com 408.947.2437 direct
Robert J. Browning
rjb@hogefenton.com 408.947.2411 direct
David S. Howard
dsh@hogefenton.com 408.947.2447 direct
David W. Mitchell
dwm@hogefenton.com 408.947.2495 direct
This Legal Update is provided as an educational service by Hoge Fenton for clients and friends of the firm. This communiqué is an overview only, and should not be construed as legal advice or advice to take any specific action.
IRS Circular 230 Disclosure. IRS regulations generally provide that, for the purpose of avoiding federal tax penalties, a taxpayer may rely only on formal written advice meeting specific requirements. Any tax advice in this message (including any attachments) does not meet those requirements and is not intended or written to be used, and cannot be used, for the purpose of avoiding federal tax penalties or promoting, marketing or recommending to another party any transaction or matter addressed herein.