ONLINE NEWSLETTER - SEPTEMBER 2005

What's New:

Check Out The Tax Credits In The New Energy Bill

On August 8, President Bush signed the Energy Policy Act of 2005, a bill that makes numerous changes to the tax code. Among the provisions that could save you tax dollars are the following:

Beginning in 2006, the current $2,000 tax deduction for the purchase of a hybrid vehicle will be replaced by a tax credit of up to $3,400. A tax credit is more valuable than a tax deduction since it reduces your tax liability dollar for dollar.

For energy-saving improvements to your home done in 2006 and 2007, you may qualify for a tax credit of up to 10% of the cost, with a $500 lifetime limit.

A tax credit of up to 30% of the cost of solar-powered hot water systems is available. The credit does not apply to hot water used for hot tubs and swimming pools.
The new law also provides credits for contractors who build energy-efficient homes and for manufacturers of energy-efficient appliances.

For details on the new credits and other provisions in the law that could affect you or your business, contact our office.

Seven Steps To Cut Your 2005 Tax Bill

Here are some things you can do between now and year-end to cut your 2005 tax bill.

1. Track down those reinvested dividends for any stock you sell in 2005. They'll add to your stock basis and reduce taxable gain.

2. Donate a vehicle to charity. Generally, you can take a charitable deduction for the gross proceeds the organization receives from selling the vehicle.

3. Start a pension plan for your small business. Business owners can take a credit of up to $500 in each of the first three years of establishing a pension plan.

4. Put money into a health savings account (HSA). Money placed into HSAs can be deducted, and the funds can be used tax-free to pay unreimbursed medical expenses.

5. Teachers: Take this break. Educators can deduct up to $250 for classroom materials purchased with their own money.

6. Pay education expenses. Consider prepaying early 2006 college fees in order to take advantage of the Hope and lifetime learning education credits in 2005.

7. Plan year-end equipment purchases. Current tax law provides a $105,000 deduction for business equipment acquired this year. So plan to place needed new equipment into service before year-end.

These are only a few steps you can take to reduce your 2005 tax bill. To discuss the best moves in your situation, give us a call.

New Bankruptcy Law Goes Into Effect Soon

Major changes to the laws governing bankruptcy go into effect next month. Here's an overview of the changes individuals need to know.

Previously, you could file for Chapter 7 bankruptcy and wipe out most of your unsecured debts. Under the new law, you will have to pass a means test to qualify for a Chapter 7 bankruptcy. If your income is too high, you'll have to file under Chapter 13 and pay off your debts under a court-approved repayment plan.

The new law requires you to complete a credit-counseling course before you can obtain bankruptcy relief.

Your retirement accounts and education savings accounts (such as Section 529 plans and education IRAs) will generally be safe from creditors, with some limits.

Take a Break

Human trivia:

* You use an average of 17 muscles for a smile.

* You use an average of 43 muscles for a frown.

* Every two thousand frowns create one wrinkle.

* The average human blinks his eyes 6,205,000 times each year.

* The average human's heart will beat 3,000,000,000 times in a lifetime.

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The information contained in this newsletter is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. For more information on anything in ONLINE ADVISOR, or for assistance with any of your tax, business, or financial strategy concerns, contact our office.