Steger, Gowie CPA Blog

Tax Saving Strategies for 2012: Considerations to Weigh when Planning to Use Your IRA Withdrawal as a Charitable Contribution

stegergowiecpa — Fri, 24 Feb 2012 18:30:28 +0000

If you are age 70 ½ or older in 2012, you are required to withdraw a minimum amount from your retirement accounts. In 2011 and prior years, the law permitted you to make a contribution from your IRA directly to one or more charities up to a total of $100,000. You did not take a charitable contribution deduction on your income tax return, but the amount was also not included in your taxable income. This is significant since your taxable income determines the amount you pay for Medicare coverage and whether some portion of your Social Security is taxable. In addition, the amount transferred directly to charity could also qualify as part of your required minimum distribution.
Steger Gowie expects that it is highly likely that Congress will reinstate this provision for 2012. Therefore, if you would like to use funds from your retirement account to make charitable contributions and have the funds qualify as part of your required minimum distribution, you should consider delaying your withdrawals until it is clear what action Congress will take.
If you are considering using your IRA withdrawal as a charitable contribution, give Steger Gowie a call today and schedule an appointment with one of our Tax Specialists at (610) 335-1020.

Tax Saving Strategies for 2012: Smart Investment Moves

stegergowiecpa — Fri, 17 Feb 2012 17:24:01 +0000

Capital Gains Taxes The long-term capital gain tax rate is 15% for 2012. Exception: If you are in the lowest two marginal tax rates of 10% and 15%, then any realized long-term capital gains are tax-free. Steger Gowie believes that this rate has the potential to increase in 2013, especially if the Bush tax cuts are neither extended nor made permanent. Because of this uncertainty, it may be very beneficial to realize any capital gains in 2012 instead of taking the chance of being subject to a higher tax rate in 2013. This means that if you have appreciated securities in your portfolio, you may want to consider selling in 2012. The same would apply to any investment property. If you are the owner of a business with the intention of selling in the near term, it may be advisable to complete the transaction in 2012.
For example, if long-term capital gain rates increase to 20% in 2013, for every $1,000 in net realized capital gain, you will pay an additional $50 in tax ($200 versus $150). If a business is sold in 2013 instead of 2012 for a gain of $1,000,000, the capital gain tax would increase by $50,000 ($200,000 versus $150,000).

Reaping Gains from Losses When you sell a security or investment property for a loss, you can use the loss to offset any capital gains realized during the same year. In addition, up to $3,000 of any loss that remains after all gains are offset can be used to reduce ordinary income. If you believe that the capital gain rate will increase in 2013, it would be more valuable to wait until 2013 to sell investments at a loss, since you would be offsetting the higher tax rate for any gains. While this is good tax planning, holding on to a security that is losing value may not be wise investment planning. We recommend that you speak to a Steger Gowie tax professional to determine the best strategy for your situation. Give us a call today and schedule an appointment with one of our Tax Specialists at (610) 335-1020.

Tax Saving Strategies for 2012: College Funds

stegergowiecpa — Fri, 10 Feb 2012 16:51:52 +0000

If you want to save money for college expenses for your children or grandchildren, consider establishing a 529 Savings Plan account. It’s important to start saving for your children’s college education, and keep saving regularly in whatever amount you can afford. After all, every dollar saved for college now is one less you’ll have to borrow or spend in the future. With the Pennsylvania 529 Guaranteed Savings Plan (GSP), you can rest easily knowing that your savings will keep up with the rising cost of tuition.

The Pennsylvania 529 GSP can help you make college affordable by helping your savings keep pace with rising tuition costs. You can also cut your tax bill with important tax advantages and special benefits for Pennsylvania residents. Pennsylvania taxpayers can deduct contributions to their PA 529 GSP from their Pennsylvania taxable income up to $13,000 per Beneficiary per year. For married couples, contributions up to $26,000 per Beneficiary are deductible, provided each spouse has taxable income of at least $13,000.

Remember, the money you save for college in your PA 529 GSP account is federal and state tax-free while it remains in the account. And when used for qualified expenses, the growth in your child’s 529 account is not subject to federal or state income taxes.

Follow these tips to get into a lower tax bracket for the 2012 tax year and the succeeding years and you will notice a big difference in tax planning. To be sure you receive all of the benefits available, have Steger Gowie guide your steps to take regarding your tax status. Give us a call today and schedule an appointment with one of our Tax Specialists at (610) 335-1020.

Tax Saving Strategies for 2012: Retirement Plans

stegergowiecpa — Fri, 03 Feb 2012 17:17:20 +0000

Taxpayers often wait until close to the end of the calendar year to consider what they can do to reduce their income tax burden. By then, however, your options are limited in what you can accomplish. Steger Gowie recommends that you think about tax reducing strategies at the beginning of the calendar year, which give you more opportunities to lighten your annual tax load.

One of the best ways to reduce your taxable income is to make pre-tax contributions to your retirement plan. Many employers offer voluntary retirement savings plans, such as a 401(k) or 403(b). For 2012, you can contribute from your payroll up to $17,000 ($22,500 is the maximum if you are over 50) into one of these plans. Set the contribution amount in January to meet your savings goal for the year. Don’t wait until June or September. If you are self-employed, you have several choices regarding pre-tax retirement savings plan. Some need to be established earlier than others. Be sure to contact Steger Gowie for advice on your best tax-saving option. As an example, if you are in the 25% marginal federal tax bracket and pay an additional state/local tax of 5%, for each $1,000 you save in your retirement plan, you will reduce your taxes by $300. Maxing out at $17,000, would save income tax of $5,100. This means that your net out of pocket is only $11,900. The government is giving you $5,100, just because you saved for your retirement.

To be sure you receive all of the benefits available, have Steger Gowie guide your steps to take regarding your tax status. Give us a call today and schedule an appointment with one of our Tax Specialists at (610) 335-1020.

Tips to Lower Your Tax Bracket

stegergowiecpa — Fri, 27 Jan 2012 17:26:58 +0000

Taking the 2011 Federal tax brackets into consideration is necessary in any type of investment venture. This makes tax planning around your estimated or potential income very much important. The purpose of tax planning is the minimizing of your Federal or state tax liabilities, and end up on the lower end of the tax brackets in 2012 and the succeeding years. Steger Gowie sees a number of ways you can successfully achieve this and decrease your income tax liabilities.

The two most common ways for individuals to reduce their income tax rates are deferring income or family member gifting. However, deduction planning, planning income tax brackets, and planning strategies for year’s end should all be considered if you want to decrease your tax liability overall. For a more comprehensive understanding of these tax planning concepts, contact Steger Gowie and make an appointment with one of our tax Specialists today at (610) 335-1020.

1. Delay income. Postponing some of your income to a later year is a great way to decrease your tax liability for the current year. A good example of this is employer sanctioned 401(k) deductions where your tax liability is reduced because the deduction comes off of your pre-tax income. The money you contribute to the plan is not taxable until you withdraw the funds from your 401(k).

2. Overall family tax liability can be lowered by family gifting. Shifting some of the income to other members of the family can decrease your position in the Federal tax brackets.

3. Focus on your after tax return and timing. There are numerous strategies such as investing in only securities that you know are tax exempt. Another is employing timing strategies for when it is right to sell off your capital assets at the right time.

4. Deduction planning. Use allowable deductions so you can avail for the lower income tax brackets. Take any circumstance that proves you are entitled to a deduction. Make sure that these are timed as efficiently as possible.

5. Marginal tax bracketing. The last two months of the year you should have your year-end tax planning strategy in place so that by tax time you get the benefit from it. It involves timing your taxable income so that you fall into the lower tax brackets, therefore having a lower federal income tax liability to deal with by midyear. Accelerate your current year’s deductions wherever you can and postpone as much income as possible.

2011 Personal Income Tax Brackets

stegergowiecpa — Fri, 20 Jan 2012 17:46:13 +0000

Tax brackets are the divisions at which income tax rates change in a progressive tax system. Essentially, they are the cut-off values for taxable income. As your income passescertain thresholds, it will be taxed at a higher rate.

In the US, the dollar amounts of the Federal income tax standard deduction and personal exemptions for the taxpayer and dependents are adjusted yearly to account for inflation. This results in annual changes to the personal income tax brackets even when the Federal income tax rates remain the same.

Understand the concept of tax brackets might help to plan an annual pay. This determines how much one should give to the IRS and the percentage that can be claimed from deductions. At Steger Gowie, we think it is important to have basic knowledge on how they work. We can generalize that Federal tax brackets can be divided into six brackets. these are: 10, 15, 25, 28, 33 and 35 percent brackets. Below is the IRS Federal Tax Brackets for 2011:

Tax Bracket      Single Married Filing Jointly         Head of Household
10% Bracket $0 – $8,500 $0 – $17,000 $0 – $12,150
15% Bracket      $8,500 – $34,500 $17,000 – $69,000 $12,150 – $46,250
25% Bracket      $34,500 – $83,600 $69,000 – $139,350 $46,250 – $119,400
28% Bracket      $83,600 – $174,400 $139,350 – $212,300             $119,400 – $193,350
33% Bracket      $174,400 – $379,150 $212,300 – $379,150             $193,350 – $379,150
35% Bracket $379,150+ $379,150+ $379,150+

The threshold for this year’s tax brackets have all increased for each filing status. The taxable income threshold for separating the 15% bracket from the 25% bracket is $2,800 more now. That applies if you fall into the category of married couple filing a joint return.

Based on the above percentages, it can be said that Federal income tax brackets are largely based on the amount of income one has. Also, these are bound to change every year in accordance to the rate of inflation. The income tax brackets are classed in accordance to the last dollar earned. The taxable income does not compare to the net total amount of the salary. One has to add up the income generated over the years whether from work or other places and hence, come up with the total amount of taxable income.

Getting professional help, especially if you do not understand the complexities of income tax brackets, will make your planning more accurate and efficient. Contact Steger Gowie today and make an appointment with one of our Tax Specialists at (610) 335-1020.

Income Tax Brackets for 2011: Where Do You Fit In?

stegergowiecpa — Fri, 13 Jan 2012 17:19:01 +0000

The Federal Income Tax Brackets for 2011 have been recently released; and, as opposed to the rumors of it being reverted to the pre-Bush tax rates, the income tax rates are retained for this year. Even if the season for filing taxes is still far away, Steger Gowie thinks you should know the proper method of filing for your income taxes.

The first thing you need to know is that your current civil status is one of the primary concerns when filing for your taxes. Single individuals would have a varied rate than married ones, while married couples who have children would also have taxes that are different from those who have no children yet. These variations would depend on the tax deductions that are awarded to the rightful individuals, so make sure that you indicate your status appropriately while you fill in your forms.

Stating that you are the Head of the Household would also give you the privilege for a specific discount on your taxes. Keep in mind that tax brackets applies to everyone in a manner that would make it fair for all earning individuals. Meanwhile, some cuts on your taxes can be approved if you indicate your eligibility for such discounts.

The Federal Income Tax Brackets for 2011 were originally projected to have an increase in the tax rates, but fortunately, the increase was not implemented. In this regard, your income tax for this year would not be changed significantly unless you have been married or if you are to declare that you are the Head of the Household. Married couples have the option to file together or separately, but its main difference from the income tax of singles would not be felt significant, unless the individuals declare additional dependents or if the couples already have a child.

Checking the Federal tax brackets early is a way to plan for what you can do once the filing season arrives. Indicating the right information on your forms would be the best way to do your part as a citizen, and it might even entitle you to get the fair share of your money. If you are not aware of the various deductions or privileges that you might avail to minimize your taxes, then it is best that you learn about which rules are applicable for you. Call Steger Gowie today to set up an appointment with one of our Tax Specialists at (610) 335-1020.

New Income Tax Brackets for 2011

stegergowiecpa — Fri, 06 Jan 2012 17:08:42 +0000

The more you, as a taxpayer, understand about the Federal Income Tax brackets for 2011 breakdown, the better prepared you will be for filing taxes with Steger Gowie. The end of the year 2010 marks the start of a new set of income tax brackets, as the tax cuts during the administration of former president Bush becomes obsolete. This raises concerns that the 2011 tax brackets might have a significant difference from its predecessor. There have been stories going around that the new tax brackets would start to implement the pre-Bush tax rates, which were 36% and 39.6% for the two upper ends of the income levels, but the good news is that the tax brackets would not be changed for now.

Regardless, Steger Gowie believes that it is important that you are aware of what your responsibilities are as a citizen, and contributing your share to the federal income tax is among such duties. You might be thinking that for the past years, the portion of your income being withheld on a monthly basis is too much, and that might actually be the case. If you think that you need to find a way to get at least a fair share of your hard-earned money, you must first understand what it means to file for and fall under the various tax brackets.

The Income Tax Brackets for 2011 varies per individual; this means that your status as a citizen would which bracket you would be in. The typical basis of the brackets is the current status of the filer, which could be either Single, Married, or Head of the House. The income tax rates varies from one citizen type to another, but the basic percentage of taxes are 10%, 15%, 25%, 28%, 33%, and 35% for the different levels of income.

As an example, single persons who have an average income of about $8500 or less are obliged to have a 10% tax, while the same percentage applies to married couples (filing together) who have a cumulative income of about $17,000. As you might have observed, the latter amount ($17,000) is just double the amount of the former ($8,500), which means that for a couple applying together, the tax is just the same as those of the single persons or married couples filing separately. However, if you were considered as Head of the Household, you would be in the same bracket if you have an income of about $12,150 or less.

The Federal tax brackets for 2011 were divided accordingly such that the earning power of each individual is taken into consideration, and each would be appropriately have their corresponding taxes. Although the 2011 tax bracket projections (in terms of the country’s finances) were not truly favorable, citizens could have the opportunity to retrieve their earnings suitably if they file their income taxes properly.

Understanding the Income Tax Brackets for 2011 should not be a problem for you if you know your rights and your responsibilities as a citizen. Be sure to know which deductions are rightfully applicable in your case, and keep in mind that as a tax-paying citizen, you can enjoy financial privileges if your income tax is filed accordingly. For more information please contact Steger Gowie at (610) 335-1020.

Rental Property to Reduce Your Taxes? – Be Careful!

stegergowiecpa — Thu, 07 Jul 2011 02:49:11 +0000

As many of you know the value of real estate has reduced considerably over the last couple of years. In fact, with low interest rates and lots of housing inventory many people feel it is a buyers’ market.

Many investors may also feel that if they own a rental property that has a loss that they will also reduce their tax liability. In many cases, you are able to deduct real estate losses but there are also circumstances where you may not be able to deduct real estate losses. You need to understand your individual tax situation to determine if you can deduct your losses in real estate.

The United States tax code allows a deduction of up to $25,000 per year in losses for a real estate rental property. This deduction begins to reduce once a taxpayer’s modified adjusted gross income (MAGI) is above $100,000 and is completely phased out (not allowed) once the MAGI exceeds $150,000. In other words, if your MAGI is above $150,000 be careful because you may not be able to count on a tax deduction from your rental property.

Let’s look at an example- Bob and Jane purchase a rental property in January of 2010. The rental income for the year is $24,000 and the various expenses to run the property for the year are $30,000. Therefore, the couple has a $6,000 loss. The taxpayer’s ability to deduct the loss depends first on their adjusted gross income. If the couple’s adjusted gross income is $100,000 or below they are able to deduct up to $25,000 of rental losses. Therefore, in this example if their adjusted gross income is below $100,000 they will be able to deduct the full $6,000 loss. Now, if the couple’s adjusted gross income is $150,000 or more they will not be able to deduct this loss in the current year.

You may ask, “Do I lose the loss forever if my modified adjusted gross income is greater than $150,000?” Fortunately you do not lose the loss. What happens is the $6,000 loss would be carried forward to future years and could be used when your MAGI is below $100,000, you sell the property, or you have other passive income.

Please be advised that this is a general summary of the deductibility of real estate losses. If you own a rental property or are considering purchasing a rental property, I highly encourage you to give us a call to understand the potential tax impact of purchasing a rental property.

David Fultz, Jr., MBA, CPA
Steger, Gowie and Co., Inc.
411 Old Baltimore Pike
Chadds Ford, PA 19317
Tel:610-388-7800 ext 2103
www.stegergowie.com

email:Dfultz@stegergowie.com

Year End Tax Planning Tips for Businesses

stegergowiecpa — Thu, 09 Jun 2011 14:15:52 +0000

If you are looking for strategies to help reduce your business taxable income, then you have come to the right place. The list below highlights some basic year-end tax planning strategies for businesses. If you would like to learn additional information on any of the strategies listed below please call us at 610-388-7800 for tax planning assistance.

1. Update your accounting records to ensure accuracy

2. Examine your choice of entity

3. Purchase new property, plant, equipment – taking advantage of section 179 depreciation

4. Contribute to a retirement account – SEP IRA, 401K, etc

5. Grant yearend bonuses to employees and officers

6. Pre-pay expenses

7. Defer income

8. Inventory write-offs for damaged/spoiled goods

9. Write-off bad debts

10. Take advantage of government credits

11. Make estimated tax payments for business shareholders