PricewaterhouseCoopers Offers Year-End Tax Planning Tips.NEW YORK--(BUSINESS WIRE)--Dec. 8, 1999-- Many recent tax law changes, some of which are first effective in 1999, make this year's tax preparation particularly complicated, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. PricewaterhouseCoopers LLP LLP - Lower Layer Protocol . As such, the professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. firm has developed a list of the major changes and some year-end tax planning Tax planning Devising strategies throughout the year in order to minimize tax liability, for example, by choosing a tax filing status that is most beneficial to the taxpayer. tips. Review of Recent Tax Changes - For 1999, home office deductions can be claimed by business people and professionals who use a home office regularly and exclusively to perform administrative tasks of their business or profession, even though the bulk of their work is performed at locations outside the home office. - Self-employed persons can deduct 60 percent of their health insurance expenses above the line as a business expense, up from 45 percent in 1998. - The amount of assets that can be transferred free of estate and gift taxes increased to $650,000 in 1999, with another increase scheduled in 2000. - The capital gains maximum rate reductions to 20 percent and 10 percent, and the reduced holding period, are fully in place in 1999. - An income exclusion for gain of up to $500,000 (married, filing jointly) or $250,000 (single individuals) from the sale of a principal residence replaces the prior law's deferral deferral - Waiting for quiet on the Ethernet. of gain in situations in which a replacement residence costing as least as much as the sales price of the former residence was purchased. Prior law also included a one-time $125,000 gain exclusion for those aged 55 or older. Although the exclusion wipes out federal income taxes on most home sales, if the sale of a home results in a gain over the new exclusion amount, the excess is now subject to tax, even if the seller purchases a home of equal or greater value. - The income limit on individuals eligible to make deductible contributions to an IRA Ira, in the Bible Ira (ī`rə), in the Bible. 1 Chief officer of David. 2, 3 Two of David's guard. IRA, abbreviation IRA. has increased to $51,000 (married, filing jointly) for 1999 and will continue to rise until it reaches $80,000 for 2007 and later years. Someone who is not a participant in an employer retirement plan, but whose spouse is, can make a maximum deductible IRA contribution at an income level of up to $150,000. - The ability to deduct contributions of appreciated stock to a private foundation, which had previously expired, was reinstated and permanently extended. - Middle-class families get a tax cut in the form of a tax credit for each child under age 17. The credit amount for each child increased to $500 for 1999. - A deduction for student loan interest is available to itemizers and non-itemizers. The above-the-line deduction on qualified student loans is available during the first 60 months interest is paid, subject to a $1,500 cap for 1999, increasing to $2,000 in 2000 and $2,500 in 2001 and later years. However, the deduction begins to phase out at MAGI (modified adjusted gross income) levels of $40,000 (individuals) and $60,000 (married, filing jointly). "While it is important to take advantage of the new tax laws, there are three year-end tax planning strategies which almost always make sense: tax reduction; tax deferral tax deferral The delay of a tax liability until a future date. For example, an IRA may result in a tax deferral on the amount contributed to the IRA and on any income earned on funds in the IRA until withdrawals are made. ; and income shifting Income Shifting A strategy of moving a person's income from a high income bracket or tax rate to a lower one. Notes: One popular form of income shifting is applying some of a person's income to their child. See also: Income Tax, Tax Table ," said Vincent Vaccaro, national director of Personal Tax Consulting at PricewaterhouseCoopers. "Tax reduction occurs when you take action that results in payment of less tax than would otherwise have been due. For example, if you switch funds from a taxable investment vehicle to a municipal bond that earns tax-free interest, you will reduce your tax bill. Tax deferral is achieved when you earn income now but pay tax on it in the future. For example, retirement plans generate income throughout the years, but are generally taxed only when assets are withdrawn. Income shifting generally involves transferring income-producing property to someone who is taxed at a lower rate. One example is giving dividend-paying stock to a family member." "It is important to review how capital gains and the Alternative Minimum Tax (AMT See vPro. ) affect your tax liability this year, when you may need year-end tax-saving strategies more than ever," added Vaccaro. Year-End Capital Gains Tax Checkup check·up n. 1. An examination or inspection. 2. A general physical examination. checkup See Yearly checkup. If taxpayers have investment profits in 1999, the recent capital gains rate reduction works in their favor. If they have losses, taxpayers may be able to take advantage of them. There is a great deal of flexibility at year-end to control the timing of investment decisions to optimize tax savings. As year-end approaches, review investment results. Calculate gains and losses and compare them with unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. or losses. However, in making these tax decisions, consider your individual financial situation and the economic viability of each investment. Year-End Tax Planning Tips - If you want to accelerate deductions into this year, mail the check by December 31 or charge on your credit card by December 31. - If your itemized deductions Itemized Deduction A deduction from a taxpayer's taxable adjusted gross income that is made up of deductions for money spent on certain goods and services throughout the year. come close to the standard deduction The name given to a fixed amount of money that may be subtracted from the adjusted gross income of a taxpayer who does not itemize certain living expenses for Income Tax purposes. amount each year, bunch itemized expenses in alternate years so that you can itemize To individually state each item or article. Frequently used in tax accounting, an itemized account or claim separately lists amounts that add up to the final sum of the total account on claim. every other year. - If you would benefit from accelerating deductions, consider December payments of state and local estimated payments due in January. - Interest incurred on car loans, credit cards, IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. adjustments, and many other types of interest are not deductible. Depending on interest rates, consider taking out a home equity loan to pay off these other debts because the interest on a home equity loan of up to $100,000 can be claimed as an itemized deduction, except for AMT purposes. - Unreimbursed medical expenses (including those of your spouse and dependents) are deductible if they exceed 7.5 percent of adjusted gross income. If medical expenses seem likely to be close or exceed the 7.5 percent floor this year, consider accelerating elective treatment and paying for it before December 31. - If you want to accelerate deductions, make charitable contributions in December, not January. - If you have self-employment income and want to deduct retirement contributions to a Keogh retirement plan, establish the plan by December 31, even though you can wait until the due date of your return (including extensions) to fund it. Alternatively, you may make deductible contributions Deductible contribution Amount paid into an IRA, an employer-sponsored retirement plan, or other type of retirement plan for a particular tax year that is a deduction from income for tax purposes. to a simplified employee pension (SEP 1. SEP - Someone Else's Problem. 2. (tool) SEP - A SASD tool from IDE. ) plan, which can be established and funded after December 31. - If you expect to receive a year-end bonus or other special compensation, you may want to receive it and pay taxes on it in 2000 rather than in 1999. PricewaterhouseCoopers has published Looking to 2000: Tax Planning for Your Personal Finances, which includes year-end and year-round tax planning tips. The book ($19.95) can be ordered by calling 1-800-579-1646. PricewaterhouseCoopers (www.pwcglobal.com) is the world's leading professional services organization. Drawing on the knowledge and skills of 150,000 people in 150 countries, we help our clients solve complex business problems and measurably enhance their ability to build value, manage risk and improve performance. PricewaterhouseCoopers refers to the US firm of PricewaterhouseCoopers LLP and other members of the worldwide PricewaterhouseCoopers organization. PricewaterhouseCoopers' Personal Financial Services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. practice provides comprehensive financial planning Financial planning Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against services designed to help build, preserve and maximize the wealth of high net worth individuals, corporate executives and business owners. PricewaterhouseCoopers professionals work with these individuals to develop integrated financial strategies, which consider the numerous aspects of wealth accumulation and its ramifications ramifications npl → Auswirkungen pl on their business and family. NOTE TO EDITORS: PricewaterhouseCoopers personal finance specialists are available in most major cities to discuss these and other tax planning ideas. Please contact Marc Eiger at 212-259-3760 for the name and phone number of a representative in your area. Note to Editors: The name PricewaterhouseCoopers is one word, with upper case P, upper case C, and all other letters in lower case. |
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