1. Investment Income: The capital gains and dividend tax rate will stay at 15% until at least the end of 2012. For any non-tax deferred investing you plan on doing, make sure you take advantage of the low 15 percent capital gains tax rate now, because the chances of it staying this low past 2012 are not great.
2. Small Business Capital Asset Deduction: Small businesses can benefit greatly from a few tax changes in 2011 by investing in fixed assets and equipment before December 31st, 2011. The Small Business Jobs Act signed this past September doubled the expense limitation from $250,000 to $500,000. The major advantage here is that these expenses can be fully deducted from the business’ taxes if they are purchased within the year 2011. Eligible investments include office furniture and equipment, machinery, and computer software. If you’re a small business owner and you’ve been holding out on buying newer office equipment, furniture, or IT equipment, this is the time to invest in it.
3. Roth IRA Conversion: A new change in 2011 tax laws will let anyone (no matter their income) convert a traditional IRA to a Roth IRA. In the past, there were income restrictions on who was allowed to convert a traditional to a Roth, but that has changed in 2011. If you believe that you’ll be in a higher tax bracket at retirement, then converting now definitely makes sense because a Roth IRA takes in taxable money, which is then not taxed when withdrawn at the retirement age. This can really help save future money. Call Kingman Winslow LLC’s office to find out whether this is a good option for your future.
4. Estate Planning: The new tax cuts and changes for 2011 can significantly save your estate money if you complete the correct estate planning. Starting in 2011, couples can add the unused estate tax exemption of their spouse (up to $5 million) to their own estate tax exemption (also up to $5 million), meaning they can transfer up to $10 million tax-free to family and heirs. For individuals with significant assets this can allow them to save big time. Remember the exemption is not automatic, individuals must plan their estate to take advantage of these exemptions before they expire. Kingman Winslow, LLC would be happy to discuss whether this exemption can save your estate money and refer you to a great estate planning attorney to assist you with drafting your wills and trusts.
5. Health Savings Accounts (also know as “HSAs”): HSAs are a great tool, which allow individuals and families to cover the cost of medical and health care expenses that would otherwise not have been covered by their health insurance plan. In effect, these Health Savings Accounts are tax advantaged medical savings accounts that you own. The funds that you contribute to an HSA are contributed on a pre-tax basis; that is they are not subject to federal taxes when you deposit them. Like an IRA accounts, you can contribute to your HSA account during any calendar year, through April 15th of the following calendar year.
The IRS Contribution Limits for 2010 and 2011, to a HSA plan, are $3,050 for a single individual and $6,150 for a family. If an individual account holder or the owner of a family HSA is age 55 or older, an additional “catch-up” contribution of $1,000 is also allowed.
Additionally, any funds in your Health Savings Account not used during the calendar year, can be rolled over into the following year. Therefore, if funds are not used and they continue to roll over, the balance in your HSA account can grow significantly over time.
We encourage you to contact Kingman Winslow, LLC anytime to discuss any of the above tax savings tools. We are happy to set up an appointment to analyze whether these tax changes will benefit your overall tax planning needs.