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Tax Central

We are dedicated to keeping clients abreast of the latest tax law changes, planning strategies and vital tax-related information. This section includes a library of timely articles, due date reminders and much more. The articles are categorized by subject matter, which can be accessed from the links.
Click on your topic of interest and find a wealth of information.

Your Individual Income Taxes

You may think you have no control over your taxes, but there are a number of strategies that can be employed to reduce or delay your tax bite. To take advantage of these possibilities requires knowledge of what strategies are available.

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Understanding Your Tax Basics
No matter what the season or your unique circumstances, when it comes to your taxes, planning usually pays off in a lower tax bill. The following is provided so that you may have a basic understanding of taxes before you discuss filing options and strategies.

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Bunching Your Deductions Can Provide Big Tax Benefits
If your tax deductions normally fall short of itemizing your deductions or even if you are able to itemize, but only marginally, you may benefit from using the “bunching” strategy.

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Avail Yourself of Your Employer's Tax-Advantaged Plans
Dependent Care Benefits - A taxpayer who works and incurs child care expenses, should check to see if their employer has a dependent care program. If the employer does provide dependent care benefits under a qualified plan, the taxpayer may be able to exclude up to $5,000 ($2,500 if Married Filing Separately) of child care expenses from his or her wages, which generally provides a greater tax benefit than the child care credit.

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Are You Supporting Your Parents?
If you are helping support your parents, you may be having difficulty showing that you provided over half of the support for both, thus failing to qualify for the dependency exemptions (and for the beneficial head of household filing status if you are an unmarried taxpayer).

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Take Advantage of a Low Income Year
If your income is abnormally low this year or your investment portfolio has taken a downturn in value, you might consider some of the following actions:

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Cut Taxes On Your Investments
Long-term capital gains tax rates will produce automatic tax savings by taxing the gain from capital assets at rates lower than the regular tax rate. To take advantage of the long-term rates, you need to hold the asset longer than one year. The long-term rate depends on two things: your marginal tax rate and how long you have held the asset.

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Plan For Selling Your Home
Each individual taxpayer, regardless of age, is allowed to exclude up to $250,000 of gain from the sale of their main home if certain requirements are met. A married couple that meets the requirements can exclude up to $500,000. To qualify for the exclusion, a taxpayer must own and live in the home as their main home for two of the prior five years immediately before the sale (under certain circumstances the five-year period is extended for military personnel and intelligence community employees). Short temporary absences, such as for vacation or other seasonal absence (even though accompanied with rental of the residence), are counted as periods of use.

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Fine Tuning Capital Gains and Losses
Year-end has historically been a good time to plan tax savings by carefully structuring capital gains and losses. Conventional wisdom has always been to minimize gains by selling “losers” to offset the gains from “winners” and where possible, generate the maximum allowable $3,000 capital loss for the year.

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What's Best…Tax-Free or Taxable Interest Income?
A frequent tax strategy question is whether it is better to invest for tax-free or taxable interest. Generally, taxable interest will provide the greater return, but this may not hold true after taking into account taxes on the income. Therefore, the question is really which provides the greater "after-tax" return. Generally, interest derived from “municipal bonds” is tax-free for federal purposes and also tax-free for a particular state if the bonds are issued by that state or its local governments. In addition, interest from U.S. Government Bonds cannot be taxed by any state.

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Save Taxes by Shifting or Deferring Income
Shifting Income to Your Child - Children under the age of 19 and full-time students under the age of 24 are subject to the so-called kiddie tax. This was enacted by Congress to restrict taxpayers from shifting large amounts of income to their children by taxing the child at the parent’s marginal tax rate. However, for children without earnings from working, there is no kiddie tax on the first $1,000 for 2013 and 2014 of investment income, and the next $1,000 is taxed at 10%. Once the child is beyond the applicable age, all of their income is taxed at their own marginal rate.

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Planning Pension Distributions
An individual may begin withdrawing, without penalty, from his or her qualified pension plans at the age of 59-1/2. Generally, distributions before age 59-1/2 are subject to a federal penalty equal to 10% of the taxable amount of the distribution, but there are several exceptions that will allow earlier withdrawal without penalty. Upon reaching age 70-1/2, you are required to take distributions from your plans or face a substantial penalty for failing to do so.

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Explore Education Tax Incentives
Congress, through the years, has provided a variety of tax incentives to help defray the cost of education. Some require long-term planning to become beneficial, while others provide current tax deductions or credits.

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Real Estate Rental Limitations
Real estate rental income is business income but is not subject to Social Security taxes. Real estate rentals are also considered passive activities. Generally, passive activity losses are only deductible to the extent of passive activity income. An exception...

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Tax Planning For Your Business
• Business Entity Choices - Non-tax considerations generally take precedence in selecting the appropriate structure for your business. However, tax considerations can also play an important role in your decision. Choosing the right business entity at the inception of your business is important, and all aspects should be carefully considered.

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Owner-Only Businesses Should Consider a Solo 401(k) Plan
It goes by many names - Solo 401(k), Mini 401(k) and single-participant 401(k). We will use Solo 401(k) in this article to describe probably the best type of pension plan for owner-only businesses. It provides for larger contributions, including a Roth option for a portion of the contribution, and the ability to borrow funds from the plan at reasonable rates. As a result, Solo 401(k) plans have become more attractive options than SEP-IRAs, Simple IRAs or profit-sharing or money purchase plans. In addition, if the plan permits and most do, assets for other retirement plans can be rolled over into the Solo 401(k) plan.

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Make the Most of Your Deductions
As you plan for your tax year, keep in mind that some tax deductions are “above-the-line” and are available whether deductions are itemized or not. In addition to the educational “above-the-line” deductions, the following deductions are noteworthy.

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Contact Us
With changes just about every year, our tax laws have become very complex. The information and strategies included in this book are overviews intended to increase your awareness of issues that might apply to you and your annual tax planning. Before implementing...

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