Akron Life March 2012 : Page 32

Ohio taxes) and allows medical expenses to be deductible when the deduction is usually lost on the itemized deduction schedule. College For parents with college-bound students, there are numerous opportunities for plan-ning. If you’re already there, as I am, be sure to watch your income so you don’t lose an Education credit. This is one credit that’s not available for “Married Filing Separately.” Not only do you need to watch your income, but you need to plan for the tim-ing of qualified education expenses. To receive the maximum credit, you must have paid qualified education expenses of $4,000 for you, your spouse or dependent who’s enrolled at least half-time in a degree program. A frequent misunderstanding is that the proceeds from a student loan may count toward qualified education expenses as “paid.” If you’re not eligible to take the credit due to adjusted gross income (AGI) limits, you may shift the credit to the student by not claiming the student. For example the Hope/American Opportunity Credit of $2,500 begins to phase-out at AGI of $160,000 for “Married Filing Jointly” and $80,000 for “Single,” “Head of Household” and “Qualifying Widow.” If hitting certain income limits isn’t important, then you should seriously con-sider taking advantage of the lower tax rates for long-term capital gains that are still in effect for 2012. may want to wait until closer to the end of 2012 before you trigger those gains, since Congress may decide to extend the lower capital gains. >> Since it’s March 2012, the strategies noted above are what you can do to affect your taxes today , but what about 2011? If you haven’t yet filed your returns for 2011, consider: 1. You may still fund an IRA for 2011 up until April 17, 2012. Check to see if you qualify to make a deductible contribution and save on taxes. 2. If you participate in an HSA and didn’t max out your contribution limit, you have until April 17, 2012 to do so. Check with your HSA provider for additional amounts you may contribute for 2011 to save taxes. 3. If you’re married and both of you have income, review the option of “Married Filing Separately.” Depending on your tax bracket, this may save taxes. 4. If you have children in college, review the benefits of not claiming them as depen-dents. Children may be eligible for college tax credits that are phased out for parents. What will happen to the Bush income-tax cuts that expire Dec. 31, 2012? Anticipate a one-year extension on tax rates for all taxpayers including high-income, as it will be pushed to 2013 since it’s highly unlikely that lawmakers will tackle this issue before elections. Will the estate tax exemption fall after 2012? Again, anticipate the $5 million exemption to be extended for one year as part of the extension of the Bush tax cuts. Will the break for direct IRA payouts to charity be revived for 2012? This is a non-controversial issue and will more than likely not be passed until the end of 2012 with the other Bush tax-cut extensions, so you’ll need to be on the lookout. This pro-vision allows those who are 70½ or older to donate up to $100,000 a year from their IRAs directly to charity, thus not including the donated amount in taxable income. Also, anticipate other expiring provisions — such as higher Alternative Minimum Tax (AMT) exemptions, deduction for state sales taxes and write-off of educator expenses — to be included in the extension. The biggest concern will be that an agree-ment won’t be reached before December 2012 — causing much last-minute tax planning. >> Talk to your tax advisor about what’s on your “Financial Bucket List.” Knowing where you are and where you want to be will enable you and your advisor to help you achieve your goals in an ever-changing economic and tax environment. / Vicki Sussman, CPA, is founder and owner of Sussman & Associates, Inc. Her other roles include being a wife to Jon (married 25 years), mother of Leah, Megan and Jacob, and a community volunteer. In her spare time, you’ll find her canning the infamous Sussman Salsa, enjoying a good glass of wine or throw-ing a party in celebration of something. Comments? E-mail them to editor Georgina K. Carson at gcarson@bakermediagroup.com. Capital Losses Another strategy for lowering income is to incur capital losses. Capital losses will off-set capital gains and, if they exceed capital gains, are deductible against other income up to $3,000; any additional amounts will carry forward until completely utilized. The most common capital loss or gain is from the sale of investments such as stock, but can also be from real estate that’s not your principal residence. If hitting certain income limits isn’t impor-tant, then you should seriously consider taking advantage of the lower tax rates for long-term capital gains that are still in effect for 2012. The maximum long-term capital gains rate remains at 15 percent. You Looking Forward What might we see in 2012 regarding taxes? Here are some frequently asked questions and answers … Will the payroll tax cut apply for all of 2012? With the 2012 elections coming up, it would be political disaster to lower work-ers’ take-home pay, so anticipate the payroll cut to apply for all of 2012 (it was effective from Jan. 1-Feb. 29, 2012 as of press time). 32 akron life march 2012

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