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Creative Asset Protection Strategies, Inc www.capstrategies.com Tax-Planning Strategies November 9th, 2007 |
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Are you paying too much in income taxes? Plan Now - and pay less in taxes in 2007
You may be able to significantly reduce your income tax bill for 2007, if you begin the process now!
Look over the items in this newsletter. We obviously cannot cover every situation. So, if you have questions or are not sure what to do, give us a call. We will be pleased to help.
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Estimate your taxes for 2007: Click
on:
Estimate your 2007 Taxes. This
will take you to a calculator on our web site that will allow you to
estimate your income taxes for 2007. The calculator will give
you the opportunity to get an estimate of what your income tax bill
will be fore 2007. If you are not happy with the answer
you get, call for an appointment and we will review your tax status
with you.
Schedule an Appointment There are other calculators available on that page - calculators to help you know how much mortgage you may qualify for - what the principal and interest payments will be at different rates and terms, and other important calculators to help you. Take a look. |
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Maximize your payments into retirement accounts—IRA, ROTH, 401K, Profit Sharing and other plans. The amount of money that you are able to put away will depend upon your financial situation and the type of plans for which you qualify. We will help you set up your plan, but plans must be initiated prior to December 31st, even though they are not funded until later. Keep in mind that your retirement account money may be placed into a true self-directed account for which you have the checkbook. Ask us how. Self-Employed 401K plans (all self-employed individuals and owner-only businesses are eligible) could allow you to contribute up to $15,500 of your income, plus up to 25% of your business income up to a total amount of $45,000 of payments into your 401K. If you are 50 or older by the end of the year, you are entitled to an extra $5,000 catch-up contribution - making your total to be up to $50,000. If you are married, it could be possible for you to put away similar amounts for your spouse - for a grand total of up to $100,000 per year for a married couple! See Self-Directed IRAs, 401Ks and Benefit Plans for more information |
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| Medical Expenses: If you have your own business, your business should have a medical expense reimbursement plan as a part of the company employment plan. (Remember that this type of plan has to apply to all employees, should it should only be used for family or owner only entities.) The Medical Expense plan allows the company to pay all of your medical expenses over and above your medical insurance premiums up to a limit, or to reimburse your for expenses paid. The value of this plan is not oly that the business you own is paying your medical expenses, ti is that you are getting a full deduction for the expenses rather than a reduced amount by putting the expenses as an itemized deduction. | |
| quipment
purchases: If you are planning to
purchase new equipment or computers for your business, it may be to
your advantage to purchase it by the end of the year—if you are able
to put it into service by December 31st. Keep in mind that you may qualify for Section 179 Treatment, which allows you to completely write off some equipment purchases in the year you put the equipment into service. You may also qualify for special depreciation rules on equipment that will allow you to have significant deductions in 2007. If you are not sure about the rules, give us a call. Lease v. Buy decisions? Auto Loans? Home Equity v. Auto Loan? Use the Financial Calculators in our D I Y Corner click: Do-It-Yourself |
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Unsold real estate: If you have unsold real estate in your portfolio—now is the time to advertise it for rent so that you can you may claim it as rental property on your return. You will need copies of ads and listings and flyers to support your claim that you held the property out for rental. You must meet special criteria if your losses, including depreciation, are more than $25,000. There are also income limitations on losses from rental property. Careful planning and record keeping are essential. If you are treated as a Passive Investor, you will not be able to take advantage of the losses on your real estate except tot he extent that you have passive income, like interest and dividends. So, the wrong decision could cost you a lot of tax dollars. Are you a Dealer or an Investor? How you are classified can have a very significant tax impact, not only for 2007, but on future years. Once you declare as a professional, there is virtually no turning back. If you are not sure about the choices here or how to make the best decision for your financial situation, we will be pleased to help. Are you a Real Estate Professional or a Passive Investor? This is a different question and is especially important for people with multiple rental properties. There is an election that has to be made with your tax return that cannot be made on an amended return - so now is the time to decide how you should file your return. There are some recordkeeping requirements that have to be met to qualify as a Real Estate Professional, so make sure that you know what is needed. |
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Tax Elections: If this is your first year with a new business or in a new area of investment, there may be important tax elections to be made with this year’s return. Pre-planning is important. Should you elect to tax your LLC as a Sub S Corp or as a C Corp? If you started the business in 2007, it may not be too late to change how you will file, but the decision and the election forms should be filed before the end of the year. Losses in LLCs are treated differently than losses in a Sub-S so careful analysis of your business and what you think the next few years will be for you is important to the decision. Filing your LLC as a Sub-S Corp could save you an important amount of taxes, so it is something to carefully consider. There may be tax advantages to electing to tax your LLC as a Sub-S, especially if there are important employee benefits paid to owners. Certain business entities should elect to file on an accrual basis and others on a cash basis. The difference the election makes could be significant. Tax elections by LLCs and Partnerships should be coordinated with the tax elections of members and partners, so making the right decision here impacts your entire tax situation and financial plan. |
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| Management Company: If you are operating through one or more LLCs and Sub-S entities, you may be able to save a lot of money but setting up a management company as the manager of your operations. The management company would be taxed as a "C" Corporation so that employee benefits can be paid there and not fall into your own personal return where a major portion of their deduction could be lost. | |
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Income and Expense Timing: Depending on other factors, you may wish to accelerate the payment of certain expenses and delay certain revenues, or accelerate revenue and defer expenses. Remember that individuals must report on a cash basis. You should carefully analyze your investments, especially stocks, to see whether it will be to your advantage tax-wise to sell certain stocks - or whether it will be to your advantage to gift those stocks to a charity. Many times taxpayers realize that they had losses that they cannot use because the did not have passive gains, or they have gains that get taxed when they have unrealized losses that could have been realized and used to offset the income. With rental and investment property, remember that losses that were deferred or limited because of passive income limitations or income limitations are allowed in the year in which the property is sold. This means that there may be tax advantages available that make selling a property this year a good decisions - from the point of taxes. Everything that may be done should be done to reduce your business income because there are many deductions and allowable expenses or credits that are tied to your income. So, by taking steps to reduce your business income, you may also be making yourself eligible for credits or special deductions that are limited by the amount of your income. |
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| Gifts to Charity: There are many situation in which gifts to charity may provide you with a tax advantage that may not be obtained by other means. One example is a Charitable Remainder Trust. It may be set up with highly appreciated real estate, or other assets. You get a tax deduction for a portion of the value given, the Trust sells the asset without tax implications to you, the principal in the trust grows on a specialized tax basis, and you get a check every year from the Trust for a percentage of the value in the Trust. There are many other variations that may be worked for your benefit and the benefit of a qualified charity. We are specialists in this area and will be pleased to help you with the benefit analysis and with the set up of the Trust and related activities. We can also assist you with charitable annuities, endowment funds, and other types of specialized charitable strategies. | |
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Creative Asset Protection Strategies, Inc Pro-Active Tax & Asset Protection Strategies 16191 NW 57th Avenue Miami, FL 33014 305-621-0220 david@capstrategies.com |
