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After the recent dismal performance of the stock
market,
you may be looking for ways to recoup any market
losses
you might have. Perhaps you've even read that you can
deduct IRA losses. Before you rush to cash out your
IRAs, you should understand what's involved.
While investment losses inside IRAs are typically not
deductible, in some cases you can take a write-off
when
you close accounts you funded with after-tax
money.
You could have a deductible loss if you close all your traditional IRAs, and the amount you receive is less than your total nondeductible contributions. Likewise, if you close all your Roth IRAs and the amount you receive is less than your Roth contributions, you might have a deductible loss. IRA losses are a miscellaneous itemized deduction
subject to an income limitation. You can deduct losses
only to the extent that your total miscellaneous
deductions, including IRA losses, exceed 2% of your
income. Before you close your IRAs, it's important to
estimate how much of your IRA loss will be limited by
the 2% income threshold. Also keep in mind that,
depending on how you reinvest the money, you could
lose
the opportunity to shelter any future earnings from tax.
The rules in this area are complex, and planning is essential to get the best tax results. Contact our office for assistance. |
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Congress acted just before its August recess to keep
a
popular car trade-in program alive. The new Car
Allowance Rebate System (CARS) -- formerly called
the
"cash for clunkers" program -- was extended on
August 7
with an additional $2 billion injection of government
funds. That means that your auto dealer is still
prepared to give you a tax-free discount of up to
$4,500 for replacing your current vehicle with a more
fuel-efficient model.
But the CARS discount isn't available on all trade-ins. To qualify, you must meet certain requirements. For starters, any car that you're trading in must be a
1984 model or newer. Also, you must have owned,
registered, and insured it for the year preceding the
trade-in. (The insurance requirement doesn't apply in
New Hampshire and Wisconsin.)
On the other side, the sticker price for the replacement car can't exceed $45,000. If your current car has a fuel economy of 18 miles per gallon or less, you must replace it with one with a rating of 22 miles per gallon or more. This entitles you to a discount of $3,500. The discount increases to $4,500 if the difference is ten miles per gallon or more. This new break may be claimed if you buy the
replacement
car or you lease it for at least five years, but it's
not available for used cars.
Similar subsidies are allowed for trade-ins involving SUVs, vans, and light trucks. For example, if the new vehicle is an SUV with a fuel economy of at least two miles per gallon higher than the trade-in, but less than five, the discount is $3,500. If it has a fuel economy of at least five miles per gallon more than the traded-in vehicle, the discount is $4,500. How do you determine a vehicle's fuel economy? The
government has established a website at
www.cars.gov to
answer this and other questions about the CARS
program.
The CARS program is subject to change due to the
funding limits, so check this site as needed for
updates.
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The Tax Tip this week deals with your business
related vehicle expenses being
deductible.
The Business Tip of the Month deals with making your company one of the best places to work. The Financial Tip of the Month warns that women
need to get serious about retirement..
The Fraud Alert has to do with phony government grant schemes.. |
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Photos © Bigstockphotos.com, istockphoto.com
Sincerely,
Linda Heineman
Linda L. Heineman, CPA, CITP
email:
linda@llhcpa.com
phone:
626-577-0979
web:
http://llhcpa.com
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