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 Adding It Up October, 2012 |
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Year-End is Upon Us; Here's Our 2012 Tax Planning Guide
To Our Clients and Friends:
Year-end planning will be more challenging than normal this year. Unless Congress acts, starting in 2013, individuals will see higher tax rates across the board and a number of popular deductions and credits will be gone. Estate and gift tax rates will be higher as well. Additionally, a number of popular deductions expired at the end of 2011 and won't be available for 2012.
Deductions not available this year include, for example, the election to deduct state and local sales taxes instead of state and local income taxes and the above-the-line deductions for tuition and educator expenses. Deductions and credits that will disappear at the end of this year include generous bonus depreciation and expensing allowances for business property and the expanded tax credits for higher education and dependent care costs. Also, the phase-out rule that reduces write-offs for the most popular itemized deduction items (including home mortgage interest, state and local taxes, and charitable donations) for high income taxpayers is scheduled to come back in 2013.
Finally, as a result of the Healthcare Act, two new Medicare taxes will kick in starting in 2013. First, there will be a new 0.9% Medicare surtax tax on wages and self-employment earnings exceeding $200,000 ($250,000 if married filing jointly; $125,000 if married filing separately). There will also be a new 3.8% Medicare contribution tax that will apply to the lesser of (1) net investment income, including interest income (but not if it is tax-exempt), capital gains, and dividends; or (2) modified Adjusted Gross Income (AGI) in excess of $200,000 ($250,000 for married filing jointly; $125,000 for married filing separately).
These tax increases are by no means a certainty. Congress could extend the Bush-era tax cuts for some or all taxpayers, revive some favorable tax rules that have expired, and extend those that are slated to expire at the end of this year. Which actions Congress will take remains to seen and may well depend on the outcome of the elections.
Despite uncertainties, what we can say for sure is that the 2012 federal income tax environment is still quite favorable, but we may not be able to say that for long. Therefore, tax planning actions taken between now and year-end may be more important than ever. This letter presents some planning ideas to consider while there is still time to act before the year-end. Some of the ideas may apply to you, some to family members, and others to your business. Click here for the rest of the letter.
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Substantial Deductions For Heavy SUVs, Trucks, and Vans used for over 50% For Business
As you have probably heard, businesses can claim substantial deductions for heavy (over 6,000 pounds gross vehicle weight) SUVs, trucks, and vans used primarily (over 50% of the time) in the business. For a heavy SUV, the business can deduct up to $25,000 of the SUV's cost in the year it is purchased . Also, the rules that limit the amount of annual depreciation allowed on passenger automobiles do not apply to heavy SUVs. This means that, for new vehicles placed in service in 2012, 50% of the remaining cost of the heavy SUV can be written off as bonus depreciation in 2012, with the balance written off over five years.
All this can add up to a substantial first-year deduction. For example, the maximum first-year depreciation deduction for a new $65,000 heavy SUV placed in service during 2012 and used 100% for business will generally be $49,000. The maximum first-year depreciation deduction for a new $65,000 passenger auto placed in service during 2012 and used 100% for business will only be $11,160 ($11,360 for a light truck or van).
Under tax law, the term heavy SUV means a SUV, truck, or van that has a gross vehicle weight rating-the manufacturer's maximum weight rating when loaded to capacity-above 6,000 and less than 14,001 pounds. However, a vehicle that otherwise meets this definition is not classified as a heavy SUV if any of the following apply: click here for the rest of the article. |
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Another One Bites The Dust!
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Michael's 40th
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It was a dark day a few weeks ago as one of our Partners (perhaps you can figure out which one), has passed a significant birthday milestone. To appropriately celebrate the occasion all K&A staff wore black shirts in a show of support, while the Partner in question took it as best as can be expected.
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2012 Taxes QuikGuide
Our handy guide will help you keep track of tax filing deadlines, recordkeeping requirements, and those tax numbers you need for your 2012 tax planning.
Learn More... |
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