Janell A. Israel & Associates
What's new in taxes:
AMT relief is still a work in
progress
Both Republicans and Democrats agree
that the alternative minimum tax (AMT) is affecting taxpayers who were never
the intended target of this alternate tax system.
Designed to make sure the wealthy
did not use credits, deductions, and other tax breaks to eliminate taxes
completely, the AMT now affects a large number of middle-income taxpayers.
That's due to the fact that AMT exemption amounts have not been indexed for
inflation.
Congress is considering a number of
AMT fixes, including a one- or two-year "patch" or complete
elimination of the tax. Unless Congress acts to fix the tax for 2007, the AMT
is estimated to affect 23 million taxpayers - mostly middle-class families.
Under current law, about 70% of married taxpayers with children, who earn
$75,000 to $100,000, will be subject to the AMT.
Tax-cutting time for 2007 is running out
Time is running out on moves you can
make to reduce your 2007 tax bill. Some actions to consider right now:
* Be sure to max out your 401(k)
plan at work. This year you can sock away $15,500 ($20,500 if you’re 50 or
older).
* Establish a pension plan for your
small business. You may qualify for a tax credit of up to $500 in each of the
plan’s first three years.
* Make gifts to family or others to
utilize your tax-free $12,000 per donee gifting allowance for 2007.
* Plan year-end business equipment
purchases to take full advantage of the increased expensing limit of $125,000
for 2007.
* The option to deduct either sales
taxes or state and local income taxes was reinstated for this year. If you plan
to deduct sales tax, consider squeezing certain planned big-ticket purchases
into 2007.
* Review your investments for
possible year-end selling to rebalance your portfolio at the lowest tax cost or
to offset gains and losses.
* Donations to charity require
substantiation for deductibility, so get the documentation you'll need for your
2007 return. Remember, all money donations require a written record, even those
under $250.
* Educators can deduct up to $250
for classroom supplies they purchase with their own money.
* Single taxpayers with income of
$65,000 or less ($130,000 or less for couples) can deduct up to $4,000 for
higher education tuition and fees. For singles with income of no more than
$80,000 ($160,000 or less for couples), the deduction limit is $2,000.
* 2007 is the final year for those
age 70½ or older to make a charitable donation of up to $100,000 from an IRA
without reporting the distribution as income.
* Itemizers may deduct qualified mortgage
insurance premiums this year. The policy must have been issued in 2007, and
income limits apply.
There are other new and
soon-to-expire provisions that could affect your tax situation this year. Call
our office for planning assistance while there is still time to take
tax-cutting action for 2007.
What's New in Finances:
Your Retirement Kitty
May Have To Last A L-O-N-G Time
You know you must invest during your
working years in order to build a fund for retirement. But what you don't know
is how many years you'll be drawing on your retirement money. Now there are new
statistics that may be helpful in estimating how long your retirement kitty has
to last.
According to the National Center for
Health Statistics, a person born in the U.S. in 2005 can expect to live about
78 years on average. That's 3% longer than life expectancies of a decade
earlier.
The average U.S. individual who
lives to age 65 can expect to live an additional 19 years. That's the average;
many people will live beyond that.
As you do the calculations for your
retirement savings, you may want to stretch your life-expectancy estimates out.
According to one financial analyst, you should probably assume that you or your
spouse will live to be 100. Underestimating your life span could mean you'll
outlive your retirement funds. For assistance with the numbers, give us a call.
Keep Your Holiday
Spending Under Control
The holiday season should be a
pleasant time - exchanging gifts, entertaining family and friends, and
extending goodwill to others. Most of us enjoy the holidays, but too often the
enjoyment is followed by financial headaches. January’s bank statements and
credit card bills bring the realization that once again we lost control of our
finances.
It doesn’t have to be that way.
Before the holidays begin, make a budget. Estimate the cost of everything you
plan to spend, from gifts to holiday decorations, entertaining, and special
events. If the total cost is manageable, then stick firmly to your budget as
you shop. If it’s not, look for ways to cut back.
Consider how you can save on holiday
gifts. Many families draw names and give one nice gift to one person, rather
than multiple small gifts to everyone. Give elderly relatives "gift
certificates" good for your help with home or garden chores. Other
cost-saving ideas: Make or bake gifts instead of buying them; give combined
gifts from parents and children instead of individual gifts; agree with your
close friends on a gift spending limit.
The holidays are a special time for
children. But even here you can curb the excesses of gift giving and teach some
good lessons too. Don’t feel you have to give your children every gift they ask
for. When they make their list, encourage them to prioritize the things they
really want. Remember, their favorites are often the simple toys that encourage
them to use their imagination.
Show your children there’s more to
the holidays than just receiving presents. Have them participate in choosing
and wrapping a gift for a less fortunate child. Encourage them to make their
own gifts for family and friends. Arrange family outings and fun activities so
the holidays become a series of enjoyable events.
Aim for more emphasis on holiday
experiences and less on spending money. You’ll enjoy the season more and may
reduce the financial hangover.
Take a Break
Step Away From The Table
According to a 2007 study, obesity
has risen dramatically since 2000. About 6.8 million American adults were
"morbidly obese" in 2005, up from 4.2 million in 2000. According to
government data, 66% of people in the U.S. are either overweight or obese.
The numbers probably reflect what is
going on in society. People are eating out more often than ever, and restaurant
meals average 170% larger than meals prepared at home. Keep that in mind when
you are asked if you would like your order super-sized.
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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 this newsletter,
or for assistance with any of your tax, business, or financial strategy
concerns, contact our office.
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