Gelman, Rosenberg & Freedman, CPAsYear-End Tax Planning Seminar

Presented By:Walter Deyhle, CPA, CFP, ABV, CM&AA

Where Personal Attention Will Never Become Obsolete!

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Rules• No throwing things!• No question is unimportant!• Do not hold questions!• Try not to be political!• Turn off phones, etc.

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Our Process• Tax organizers• E-filing• Copies of returns• Portal (coming soon)

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News Affecting Taxes

• Deficit > $1.4 trillion• Bush tax cuts expire 12/31/2010• Funding for War in Iraq & Afghanistan• Funding for Health Care reform

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Federal Expiring Provisions

Federal Expiring Provisions (cont’d)

12/31/2009 IRC Section

Waiver of minimum required distribution rules for certain retirement plans

401(a)

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Federal Expiring Provisions (cont’d)12/31/2010 IRC Section

Reduced capital gain and qualifying dividend rates

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• Lowest tax rate to increase from 10% to 15%• Top tax rate to increase from 35% to

39.6%

Federal Expiring Provisions (cont’d)

12/31/2010 IRC Section

Personal energy property credit

25C(g)

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Estate & Gift Tax

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Estate Tax Basics• Unified gift & tax system• Current exclusion $3.5M per person• Annual gifting of $13,000• Exclusion for education and medical

payments• Step–Up Basis• Top tax rate 35%

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Roth IRA

Convert to a ROTH IRA?TRADITIONAL ROTH

Tax Deductible No Tax Deduction

Qualified Distributions Taxable

Qualified Distributions Tax FreeTax Deferred Growth Tax Free Growth

Required Minimum Distribution

No Required Minimum Distribution

Most Effective When Tax Rate Lower at Retirement

Most Effective When Tax Rate Higher at Retirement

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• Do not need IRA to pay tax• Expect to be in a higher tax bracket

in retirement• Do not need IRA in retirement• Expect to pay estate taxes

When To Convert

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• No required minimum distributions• Pass to heirs• Heirs have required RMD

When To Convert (cont’d)

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Housing Credit

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Housing Credit• Worker, Homeownership, and Business

Assistance Act of 2009• Income limit increased $125,000 / $225,000• P&S by 4/30/10 – close before 7/1/10

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Housing Credit (cont’d)

• Long-time resident• 5 consecutive years / last 8• lesser of 10% or $6,500• Homes up to $800,000

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Residential Energy Credit

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Residential Energy Credit• Removes individual item caps• Increases limit to $1,500 • Increases from 10% to 30%• Prior $500 not counted• For 2009 & 2010 installations• Required energy efficiency increased

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House Health Act

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House Health Act• Employers with over $750,000 of

payroll must provide 72.5% single or 65% family • Individual required to get insurance, if

not 2.5% tax21

House Health Act (cont’d)

• 5.4% surtax $500,000/$1,000,000

effective 2011

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2011

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Rates for the “Rich”• Rich is:•$250,000 MFJ•$200,000 Single• 35% to 39.5%• 33% to 36% • Capital gains & qualified dividends to 20%• Possible top marginal rate 45%

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Other Items Aimed At “Rich”

• Reinstate 3% phase-out of itemized

deductions• Reinstate 3% phase-out of exemptions

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Kiddie Tax• $950 allowance• Earned income taxed at child’s rate• $1,900 of investment income taxed

at child’s rate• Excess investment income taxed at

parent’s rate

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Kiddie Tax (cont’d)

• Applies to children age 18 and younger

and “children” age 23 and younger who are full-time students

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Other Items of Interest• Sale of residence rules• Capital gain/loss rules• Mortgage interest rules• Life settlements

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Alternative Minimum Tax

4550 Montgomery Avenue, Suite 650 NBethesda, MD 20814

301-951-9090 • www.grfcpa.com

Walter Deyhle, CPA, CFP, ABV, CM&AAGelman, Rosenberg & Freedman, CPAswdeyhle@grfcpa.com

Where Personal Attention Will Never Become Obsolete!30

Questions?