Tax Tips Newsletter
Serving you since 1993
August 2007 - Vol 2, Issue 6
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Greetings!
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Well, it's definitely vacation time. My trip to the Baltic States was really fabulous. I've only been back for a little over a week and now I'm off again. I have an opportunity to visit Madrid for next to nothing. It was just too good of an opportunity to turn down. I will be gone from August 1 - 10th.

This time the office will be open while I am away. As usual, I have arranged to have CPA friends of mine available for any emergencies that may arise while I am gone.

Windfall
If you or someone in your family has an IRA and is 70½ or older, there's a new tax rule you should know about.

The new rule lets taxpayers who are 70½ or older make donations of up to $100,000 directly from an IRA to a qualified charity. Charity-minded older individuals may find this new opportunity a winning tax strategy. Here's why: Charitable IRA distributions are not included in income, nor are they deductible as charitable donations. They qualify as required minimum distributions.

There are some restrictions. The donation cannot be made to a donor advised fund or supporting foundation. If any benefit is received in exchange for the donations, the entire distribution will be taxable. The charity must provide the donor with a tax receipt containing all the proper substantiation. Also important to note is the requirement that the donation must be made directly from the IRA to the charity and not paid to the taxpayer first.

This provision is scheduled to expire this year, so if you or someone you know is interested in learning more about this tax break, give me a call.
50s and 100s
About four million taxpayers were hit with the alternative minimum tax (AMT) in 2006. That's the tax created back in 1969 to ensure that high-income taxpayers paid at least a minimum amount of tax, even if they had sufficient deductions and credits to reduce their regular federal income tax liability to zero.

Because the AMT exemption amounts haven't been indexed for inflation, the tax has affected more and more taxpayers each year. Unless Congress acts to change the AMT, it's projected to affect 23 million taxpayers in 2007. The AMT is often overlooked by taxpayers as they do their planning, and being hit by this tax frequently comes as a nasty surprise at tax filing time.

Do you need to concern yourself with the AMT? You do if you have a lot of dependents or if you claim substantial itemized deductions. You may also be subject to the AMT if you exercise incentive stock options, invest in private activity bonds, claim certain tax credits, or use certain other tax preference items.

Don't let the AMT cause your tax strategies for 2007 to backfire. To do a midyear tax planning review that includes a check of your AMT exposure, give me a call today.
Financial Navigation
The Tax Tip of the Week this week deals with the private mortgage insurance deduction (PMI).
The Business Tip of the Month deals with how to create a professional image for your businesses.

The Financial Tip of the Month are 3 habits for staying out of debt.

The Fraud Tip of the Month deals with a new jury duty scam.

Photos © Bigstockphotos.com

Sincerely,
Linda Heineman
Linda L. Heineman, CPA

phone: 626-577-0979
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