12/31/2001 - Note the new standard mileage rates for 2002
The IRS has announced the new vehicle mileage rates for 2002. These rates can be used in lieu of keeping track of actual vehicle expenses when conducting business, working for charity, moving to a new home, or traveling for medical care.
12/24/2001 - Some home improvements are deductible medical expenses
Assuming your home improvement is for a bona fide medical purpose, the construction cost is deductible to the extent that the cost exceeds the increase in value of your home. You are only permitted to take a deduction for the costs not compensated by insurance. Assume that your doctor recommends an air conditioner/filter system for your allergies. If the system costs $6,000 but the increase in the value of the home is $2,000, you have a $4,000 deductible medical expense.
12/17/2001 - Don't get taken for a ride
It seems you can't turn on the radio these days without hearing a pitch to donate your old vehicle to charity. The charity promises a tax deduction in return for your old car, boat, or aircraft. Is this pitch too good to be true? Here's what you should know.
12/10/2001 - Some estates benefit by the drop in the stock market
Normally, an estate's valuation is determined on the day the owner dies. However, the Tax Code allows an alternate valuation date of six months after the date of death. The estate administrator can use the date that is most advantageous to the estate. A lower valuation means lower estate taxes.
11/19/2001 - How to make the best use of your accountant
If you have a tax return that is anything other than the very simplest, you can benefit from professional help. Your tax return is an excellent window into the rest of your financial world. In addition to proper tax planning and preparation, your accountant can assist you with other financial and business matters. Since we deal with a great variety of money matters and many other professional advisors, you can rely on us to provide you with much more than a tax return.
11/6/2001 - Alimony: save money by knowing the tax rules
It can be financially painful to make huge long-term payments to an ex-spouse. It is even more painful to do so with after-tax dollars. If you are in the 39.1% tax bracket, you must earn $1,642 to provide a $1,000 after-tax payment to your ex.
10/22/2001 - Deduct your "points"
If you recently purchased a home or refinanced your home mortgage, you may be entitled to a tax deduction. Typically, lenders charge "points" or prepaid interest in exchange for a discounted interest rate. Points are deductible as follows:
10/8/2001 - Take precautions for disaster
Following the September 11 terrorist attacks, President Bush declared five New York boroughs and Arlington County, VA as federal disaster areas. Another 36 federal disaster areas have been declared so far this year. If you suffer losses from a casualty, you may be able to claim a tax deduction. But how will you prove your losses to the IRS?
10/1/2001 - Reverse 2000 Roth conversion before October 15 to cut taxes
Many investors have seen the value of their retirement portfolio decline since early 2000, particularly in the past few weeks. If you converted your regular IRA to a Roth last year, you may be regretting your decision. The amount of tax on a conversion is based on the value of the IRA on the date of the rollover. Paying income tax on a Roth IRA rollover is bad enough, but paying tax on value that is no longer there is like pouring salt in the wound. Fortunately, you can still reverse a 2000 Roth rollover and eliminate the tax bill on the conversion.
9/24/2001 - Start your year-end tax planning now
It may be tempting to ignore your taxes until you sit down to prepare your 2001 return. But for those who take the time to do some year-end planning, the rewards can be substantial. Here are some tax planning ideas to consider.
9/10/2001 - Businesses: Set up SIMPLE plan by October 1
If you're self-employed or own a small business and don't currently have a retirement plan in place, consider setting up a SIMPLE plan (Savings Incentive Match Plan for Employees). These plans are limited to employers with 100 or fewer employees. A SIMPLE may be structured either as an IRA or 401(k) plan. An important advantage to the SIMPLE-IRA plan is that setup and administration costs are minimal.
7/23/2001 - Avoid this divorce trap
Dividing marital property when couples divorce can be a tedious and difficult process. In many cases splitting the assets 50-50 may appear to be a fair distribution, but not all assets are created equal under the tax law. For example, some assets are tax-free, some are tax-advantaged, and some are taxed at ordinary income rates. Failure to consider a property's tax consequences could result in one spouse getting fewer assets than the other.
7/1/2001 - Turn your losses into a tax break
If you are holding worthless or underperforming stocks in your investment portfolio, you may be able to use them to cut your taxes this year. Up to $3,000 of capital losses in excess of capital gains can be used to offset salary and other income.
6/25/2001 - Avoid this costly mistake
When you change jobs, you may be faced with making a decision about what to do with your 401(k) money. While you might be tempted to cash out your retirement fund, it could prove to be a costly mistake.
6/18/2001 - Employers: Withhold less tax after June 30
On June 7, 2001, President Bush signed the largest tax cut legislation in two decades. One major provision of The Economic Growth and Tax Relief Reconciliation Act of 2001 cuts income tax rates over a period of six years.
6/11/2001 - Expect a tax rebate check soon
Sometime in the next few months, millions of American taxpayers will receive an advance refund check for 2001. The refund is due to the new 10% tax bracket created by The Economic Growth and Tax Relief Reconciliation Act of 2001 which became law on June 7, 2001.
6/4/2001 - Get ready to "crunch the numbers" with new tax law
Congress just passed the $1.35 trillion Economic Growth and Tax Relief Reconciliation Act of 2001. Some provisions of the new law take effect this year, while others will be phased in over the next ten years. The new law affects every taxpayer, so you'll need to consider its provisions as you do your 2001 tax planning.
5/28/2001 - Don't forget to recover your cost
Good recordkeeping is essential to keeping your taxes the lowest allowed under the law. If you own investments, your system should be designed to track an investment from the time you acquire it until the time you sell it. Incomplete records make it difficult to calculate the correct gain when you sell an investment, and that may cause you to pay unnecessary taxes. Here are some common mistakes investors make.
5/21/2001 - Don't give Uncle Sam a tax-free loan
Shortly before the April 16 filing deadline for 2000 tax returns, the IRS had approved refunds totaling more than $115 billion, up 5% from the prior year. The average refund was over $1,700. While some taxpayers rely on the IRS to help them save money, these refunds amount to interest-free loans to the IRS.
5/7/2001 - Take advantage of the stock market decline
The decline in the stock market might not be all bad news. In fact, it might present a great opportunity to save taxes. With the stock market recently plunging to a two-year low, this might be a good time to make gifts to your children or grandchildren.
4/30/2001 - Choose your auto expense method wisely
If you drive your car for work, you have an important decision to make. The IRS allows two different methods to calculate your tax deduction - the actual expense method and the standard mileage method.
4/23/2001 - Don't overpay your income tax
Has this ever happened to you? You rush to get your income tax return in the mail only to discover a deduction you overlooked. Or you receive a corrected year-end statement for one of your investments a week after you dropped your return in the mail. Well, the good news is that you can correct your return for up to three years after you file your original return.
4/16/2001 - What's an "above-the-line" deduction?
Above-the-line deductions reduce your adjusted gross income (AGI). That's important because your AGI level determines whether you are eligible for at least 20 other tax benefits, such as tax credits, itemized deductions, and exemptions.
4/9/2001 - Cut a deal with the IRS
If you can't pay the entire balance due on your 2001 income tax return, you may be able to work out a monthly payment plan with the IRS to avoid its other collection efforts.
4/2/2001 - You don't need to replace your home
When you sell your home, you don't have to buy a more expensive house in order to postpone taxes on the sale. In fact, you don't have to invest in another house at all. If you meet certain qualifications, you can use your sale proceeds for whatever purpose you choose — without having to pay tax.
3/26/2001 - Reclaim your garage and get a tax deduction too
Is your garage or storage unit full of "treasures" that you will never use again? If you donate your property to a qualified charitable organization, you can reclaim the space. A charity can turn your donation into cash and use the cash to help others. And you can take a tax deduction for the fair market value of your contribution if you itemize deductions on your tax return.
3/12/2001 - Pick the best filing status
Understanding your filing status choices and selecting the one that is best for you can cut your tax bill. Your filing status determines your tax bracket. It also sets the income level at which you become ineligible for certain tax benefits, such as deductible IRAs and the child tax credit.
3/5/2001 - Follow the IRA rules or pay a 50% penalty
IRA's rules are complex and they just changed again. Understanding and following the rules will allow you to avoid penalties and to leave the maximum amount possible to grow in your tax-sheltered IRA account until you need the money.
2/12/2001 - Use tax breaks to lower the cost of raising your child
Adding a child to your household can enrich your family, but it can also deplete your bank account. Studies indicate that it costs over $150,000 to raise a child to age 18. Using every available tax break can help you reduce your costs. Check out these possibilities:
2/5/2001 - Avoid becoming a pen pal with the IRS
Getting a letter or notice from the IRS can be upsetting, confusing, and unnecessary. The IRS sends taxpayers notices to request payment for taxes, to notify them of a change to their account, or to request additional information. Attention to the following details will reduce the likelihood that you will become pen pals with the IRS.
1/22/2001 - Make sure your social security numbers are correct
If your tax return has an incorrect or missing social security number, the IRS may increase your tax or reduce your refund. The IRS just announced that it won't tolerate invalid social security numbers for spouses and dependents on 2000 tax returns.
1/1/2001 - Your investment expenses are deductible, within limits
Investment expenses such as investment counseling, office expenses, and management fees are deductible as miscellaneous itemized deductions. You are entitled to deduct investment related travel costs, but not vacation expenses. Your travel expenses to see your accountant or your other advisors on tax related matters are deductible. Your travel expenses to attend an investment seminar are not deductible, even though you may see travel industry advertisements to the contrary.
"Tax Tips" are published weekly to provide useful tax information. Return to this site every week for helpful tax-cutting suggestions, tax reminders, and current tax information.
The information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
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