Janell
A. Israel & Associates
1585
Kapiolani Blvd., Suite 1604, Honolulu, Hawaii 96814 Phone: 808-942-8817
August
2009 Tax Newsletter
What's new in taxes:
The economy hasn't
been doing well, and when the economy slumps, so do tax collections. The
American Institute for Economic Research reported a 34% drop in federal taxes
collected in April 2009 compared with April 2008. For the 12 months ended in
April 2009, tax revenue dropped 44% compared to a year earlier.
On the topic of taxes:
President and Mrs. Obama reported 2008 income of $2.7 million and paid $855,000
in federal income tax. Vice President and Mrs. Biden reported $269,000 of
income and paid $47,000 in federal income tax.
Summer's here, and
probably the last thing on your mind is tax planning. The problem is that if
you wait until December, there's little time for changes to take effect. But if
you take the time to plan now, you still have six months for your actions to
make a difference on your 2009 tax return. With the recent tax changes,
planning for the reduction of your 2009 taxes is more important than ever. Here
are some suggestions to get you started.
* You might want to
schedule home improvement projects to benefit from the tax credits available
for energy-saving expenditures on your principal residence.
* Evaluate your
investment portfolio. If you have been avoiding the disheartening news, now is
the time to reassert control over your investments. Review your holdings to see
if you should take some losses to offset other income. If you're considering investment
purchases, analyze the type of income you'll be receiving from the assets you
buy. Then stash the investment in the proper account (taxable, deferred, or
nontaxable) to achieve maximum return and tax savings.
* Adjust your
retirement plan contributions. Are you still making contributions based on last
year's numbers? Maximum amounts have increased for some plans in 2009. You can
contribute up to $11,500 to a SIMPLE, up to $16,500 to a 401(k), and up to
$5,000 to an IRA. Remember to add catch-up contributions if you'll be 50 by the
end of December.
* Factor two recent
tax changes into your planning for retirement fund withdrawals if you're 70-1/2
or older. First, the option to make a direct nontaxable donation of up to
$100,000 from your IRA to a charity has been reinstated. Second, the
requirement to take a minimum distribution from your retirement plan is waived
for 2009. This applies to 401(k) plans, 403(b) plans, certain 457(b) plans, and
IRAs.
* The estate tax is
still alive and well, so as part of your midyear review, do any updating that's
needed to your will and other estate documents.
* Do some business tax
planning, too. Plan your equipment purchases to benefit from the extension of
50% bonus depreciation for new equipment and up to $250,000 first-year
expensing for new or used equipment.
Mix business with your
summer vacation and you might be able to deduct some of your travel expenses on
your 2009 tax return. To benefit, the primary reason for your trip has to be
business.
Making time for 2009
tax planning now not only helps reduce your taxes, but also helps to put you in
control of your entire financial situation. Tax planning should be a year-round
process, but it's especially effective at midyear. Give us a call for guidance
in implementing the best moves for your particular situation.
What's New in Finances:
As baby boomers retire
and sign up for social security and Medicare, these programs will be paying
benefits to millions more. It's estimated that the number receiving social
security benefits will increase by one to two million a year from 2009 through
2032. In the 1990's, by comparison, about half a million beneficiaries were
added each year. Starting in 2011, more than one million people will be added
to Medicare each year.
Consider direct education gifts - There's no limit and no
taxes
There are many ways to
pay for a child's education, but one of the methods that you might not be aware
of is that of direct education gifts.
In 2009 a person is
allowed to give up to $13,000 to another individual without running afoul of
the gift tax exclusion. However, if a payment is made directly to a qualifying
education institution, the $13,000 per person annual gift limitation does not
apply. Not only are the gift tax limitations removed, making substantial
education payments in this manner could also reduce the taxable estate of the
person making the gift, thereby reducing exposure to estate taxes.
In this case, a
"child" doesn't have to be your offspring. It can be a niece, nephew,
grandchild, or anybody else of any age, either related or unrelated. And the
term "education" isn't limited to only college tuition. The rules
also apply to private education institutions where tuition is a requirement for
entry, such as elementary and high schools.
However, only tuition
is allowed to be paid under these rules. Books, room, board, supplies, and
entertainment aren't eligible for this exclusion.
It's even possible to
make payments for multiple school years at one time, so you're not limited to
making annual gifts for each school year. A potential pitfall to this
multiple-year strategy is that once the funds are given to the institution,
they can't be refunded. If the student decides not to attend that institution,
your tax-saving plan will have backfired.
While this gift and
estate tax savings strategy might seem simple, contact us for assistance to
ensure the desired outcome.
Take a Break
A thought to ponder...
You're never as old as
you're going to get. (Does that make you feel better?)
***********************************************************************************************************************************************************
The information contained in this newsletter is provided by
Mostad & Christensen, Inc. The information 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.
Securities and advisory services offered through National
Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser.
Janell Israel & Associates and NPC are separate and unrelated companies.
This message and any attachments contain information which
may be confidential and/or privileged and is intended for use only by the addressee(s)
named on this transmission. If you are not the intended recipient, or the
employee or agent responsible for delivering the message to the intended
recipient, you are notified that any review, copying, distribution or use of
this transmission is strictly prohibited. If you have received this
transmission in error, please (i) notify the sender immediately by e-mail or by
telephone and (ii) destroy all copies of this message. If you do not wish to
receive marketing e-mails from this sender, please send an e-mail reply or a
postcard to 1585 Kapiolani Blvd., Suite 1604,Honolulu, Hawaii 96814.
Please visit www.janellisrael.com for up-to-date financial
information & www.postoplanning.com for information regarding long term
care insurance.