Year End Business Tax Tips

It is always my intent to provide you with information and services that put you at an advantage in business.  To that end, I am attaching information from Charles Davis, a trusted tax advisor.  Read through this information when you have time, I hope it helps... if you contact Charles, please be sure to let him know I sent you!  ~bf

December 31^st is approaching fast and time is running out to take advantage of 2009 tax planning opportunities. If you make estimated tax payments to the Commonwealth of Massachusetts, make your 4^th quarter payment on or before the 31^st. And while you may not associate December 31 with taxes, it’s the deadline to take advantage of some of the most valuable planning opportunities. Proactive tax planning is the key to minimizing your tax. I’ve attached a copy of my most recent newsletter that contains some year-end tax saving ideas. In addition to the ideas in the newsletter, below is some additional information that I want to pass along.

1.       If you own mutual funds in a taxable account you may have significant capital gains distributions. When the market is down, many managers start selling holdings in order to avoid losing positions. So, if you have mutual funds outside a retirement account, you may want to call the fund before the end of the year to determine your capital gains. If significant, you can sell losing positions is non-retirement stocks or mutual funds to offset these gains. Additionally, if you wait at least 31 days from date of sale, you can buy the stock or fund back.

2.       Tax on long-term capital gains (from property you hold more than 12 months) is generally capped at 15%, even for taxpayers in the top brackets.  President Obama has proposed creating a new top capital gains rate of 20% for individuals earning over $200,000 and families earning over $250,000.  If you have appreciated assets such as securities, real estate, or a business you'd like to sell, consider doing so before new rates become effective.

3.       The 2009 stimulus act expanded the "Hope Scholarship" tax credit for college costs, and renamed it the "American Opportunity" credit.  The new credit equals 100% of the first $2,000 in eligible expenses per student, plus 25% of the next $2,000, for a total credit of $2,500.

4.       If you took out a mortgage in 2009 and were required to pay for mortgage insurance, the deduction for premiums has been extended through 2010.

5.       If you are considering a hybrid vehicle, call me first. Many vehicles are no longer eligible.

6.       You have until April 15^th to contribute to a Traditional IRA. The limit is $5000 for 2009 which is increased to $6000 if you are over 50.

7.       If you are considering converting to a Roth IRA, 2010 may be the year. Read the newsletter and call me for further details.

8.       In 2009 you may gift up to $13,000 tax free to any individual. It appears that $13,000 will be the 2010 amount as well.

9.       IRS audit odds are increasing, from 1 in 200 returns for 2000 to 1 in 99 for 2007.  But your chance of getting audited is still minimal. Don't take low audit rates as an invitation to cheat! But don't let fear of an audit stop you from taking every legitimate deduction you're entitled to.

10.   The IRS has just announced the standard mileage rates for 2009. They are as follows:

¨       50 cents per mile driven for business

¨       16.5 cents per mile driven for medical or moving purposes

¨       14 cents per mile driven in service of charitable organizations

Charles Davis
Davis Tax & Financial
taxpro@davistaxandfinancial.com