Consult with your tax advisor regarding these issues, or call us for details. Facts below generally apply to 2011-2012.
Maximize Pension Plans, 401(k) plans, and IRA's. Often this must be done by year end. Consider a Roth IRA if your gross income level is not too high (Roth phase out is between $166,000 and $176,000 for married filing jointly status). In some cases, we may need to prepare your tax return, before it can be determined if you qualify.
If your tax bracket it higher for 2011 than 2012, it may be beneficial to accelerate deductions into 2011 and defer income to 2012. Deductions that can be moved into 2008 by tax basis taxpayers includes payment of your April 2011 property taxes, and payment of State Income Tax obligations that will be due by April 15, 2012. To deduct these items, they must be paid by the end of 2011. You can email us to get a State Voucher for payment of your taxes if you do not already have one (current clients only).
Remember to try and achieve Long Term Capital Gains on investments. Generally, you must hold your property at least one year to acquire long term gain status. The past few years there have been huge capital gain losses. Capital losses are limited to $3,000 per year unless you have gains to offset them against. Consider selling enough of your depreciated stock this year to realize the $3,000 deduction. However, you rarely should let tax motivations be the predominant factor in your investment decisions. For 2011 Capital Gain rates are 5% or 15%. Qualified Stock Dividends are also taxed at 15%.
Additional First Year Depreciation (also known as Section 179) The maximum Section 179 deduction for 2011 is $500,000 (up from $250k previously). There is a limiting threshold on taxpayers purchasing more than $2 Million Dollars (up from $800k previously) of fixed assets. Please use a professional to complete this calculation.
Maximum IRA Contributions For 2011 the maximum is $5,000 with $1,000 catch up provision for those over 50 years of age, making the total contribution for an over 50 qualifying individual $6,000.
The Annual Gift Exclusion for 2011 is $13,000 per person. However, you can effectively gift an additional amount if you pay school tuition directly to the educational institution. Contact us directly for details.
Social Security Tax Wage Base: For 2011, the way base for withholding social security (old age, survivors, and disability insurance) is $106,800. In 2012 it will rise to $110,100. there is no wage base limit for Medicare (hospital insurance - 1.45%). For social security, the tax rate is 7.65% for employees and 15.30% for self-employed individuals.
SDI Tax Wage Base: The State Disability Insurance (SDI) withholding rate for 2012 is 1.0%. The taxable wage limit is $95,585 for each employee per calednar
