Janell
A. Israel & Associates
1585
Kapiolani Blvd., Suite 1604, Honolulu, Hawaii 96814 Phone: 808-942-8817
September
2009 Tax Newsletter
What's new in taxes:
The IRS Reminds Taxpayers To Use New Tax Breaks
The
IRS has issued a news release reminding taxpayers to take advantage of the tax
breaks provided in the "American Recovery and Reinvestment Act of
2009," the recovery law passed earlier this year.
Among
the tax benefits that are available for a limited time:
*
First-time homebuyer credit of up to $8,000 for homes purchased before December
1, 2009.
*
Deduction for state and local sales and excise taxes paid on the purchase of a
new car, light truck, motor home, or motorcycle. No limit on the number of
vehicles you may buy, but the deduction per vehicle is limited to tax on up to
$49,500 of the purchase price. Higher-income taxpayers won't qualify for the
deduction, and the deduction ends after 2009.
*
Credit for energy-efficient home improvements of up to $1,500 for improvements
done in 2009 and 2010.
*
American opportunity tax credit of up to $2,500 for qualifying higher education
expenses for 2009 and 2010.
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The IRS is so concerned that taxpayers will not utilize
these tax breaks that it has also launched a YouTube video site and an iTunes
podcast with information about these tax breaks. Ten Tips for Taxpayers Making Charitable Donations |
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Do A Year-End Investment Review To Cut Taxes And Increase
Returns
This is
a good time of year to review and rebalance your investment portfolio. Although
the recent market volatility has been disastrous for many investors, there may
still be some year-end moves you can make that will cut your 2009 taxes and
increase your after-tax returns. As you identify investments to buy and sell,
keep the following tax implications in mind:
*
First, remember that any sales you make within your retirement accounts are
free of tax. If you need to trade just to rebalance your portfolio, consider
doing it in your IRA or 401(k) plan.
* If
you're selling investments to weed out poor performers, remember that losses
can cut your tax bill. You can use capital losses to offset taxable gains, plus
up to $3,000 of other income. If you still have losses left over, you can carry
them forward to use in future years.
* Not
all dividends on stocks and mutual funds are taxed at the same rate.
"Qualified" dividends paid by most U.S. and some foreign companies
enjoy lower rates of 5% or 15%, depending on your tax bracket.
* You
can often manage the size of your gain or loss when you decide to sell some,
but not all, of a particular stock or mutual fund. To do this, you must have
kept good records of the date and the price for each share purchase. By selling
the highest cost shares first, you'll minimize your taxable gain or maximize
your loss. You must specify the particular shares you are selling at the time
you sell.
*
Don't forget to include any reinvested dividends when you calculate your cost
basis for mutual fund shares.
* If
you're planning to buy or sell mutual fund shares close to year-end, take the
tax consequences of the fund's year-end distribution into account.
* If
you want to dispose of stock that has appreciated, consider donating it to your
favorite charity. You can generally claim a deduction for the appreciated value
and avoid paying any tax on your gain.
Give
us a call to find out more about year-end investment planning.
What's New in Finances:
New Credit Card Rules Become Effective
The
new "Credit Card Accountability, Responsibility and Disclosure Act of
2009" (CARD), which is designed to protect consumers from unfair credit
practices, generally does not take effect until February 2010. But a few
provisions went into effect on August 20, 2009.
Credit
card companies must now give consumers 45 days notice before changing interest
rates or fees. However, they don't need to warn you of a rate increase if your
payment is late by 60 or more days.
The
new law will not allow credit card companies to count your payment as late
unless they've sent their bill at least 21 days before it is due.
Provisions
in the law which go into effect next year will restrict rate increases on
existing card debt and marketing to college students.
As Things Change, Update Your Beneficiaries
Although
life's only certainties may be death and taxes, we rarely enjoy planning for
them. But without planning, your assets can go to unintended recipients -
including the government.
* Only
the first step. Naming your beneficiaries is only the first step. It's just as
important to periodically review the beneficiaries designated by your will,
insurance policies, investment accounts, retirement plans, and similar
documents. Examine each document carefully, because some assets may pass to the
beneficiaries named in the governing document, regardless of the terms of your
will.
Example:
You name your husband as sole beneficiary of your life insurance policy and
your 401(k) plan. After a few years, you divorce and remarry. You remove your
ex-husband from your will and name your new husband as the insurance
beneficiary, but you forget about the 401(k) plan. The result: When you die,
your ex-husband probably will inherit the plan assets.
Events
that might require changing beneficiaries include marriage, birth, divorce,
death of a beneficiary, increases or decreases in your wealth, changes in tax
law, or simple changes of heart. Even in the absence of a triggering event,
it's wise to review your designations regularly. A beneficiary may have fallen
out of favor. A once-needy beneficiary may have become wealthy, enabling you to
divert your assets elsewhere. Ongoing changes to estate tax law may mandate
different approaches to beneficiary selection.
*
Where to start. When reviewing your beneficiary designations, start by listing
the relevant documents. In addition to your will, personal life insurance, and
active retirement plan, include employer-provided life insurance and life
insurance associated with services such as credit cards, medical plans, and
trade associations. You'll also need to look at stock purchase plans, stock
option plans, and similar benefit programs.
If you
haven't reviewed your beneficiary designations lately, think about doing it
soon. For assistance in your review, give us and your attorney a call.
Take a Break
Millions, Billions, Trillions: Just how much money is it?
The
recent stimulus law provided about $800 billion dollars in an effort to get the
U.S. economy back on track. The proposed 2010 federal budget hit the $3.5
trillion mark.
Just
how much money is that? Most people have a hard time envisioning such
astronomical amounts. Here's a visual that might help.
$1,000,000
- If you laid one million one-dollar bills end-to-end, you would have a path 95
miles long.
$1,000,000,000
- A billion one-dollar bills laid end-to-end would go around the earth almost
four times. (The earth is about 25,000 miles around.)
$1,000,000,000,000
- A trillion one-dollar bills laid end-to-end would go around the earth 3,800
times. So a $3.5 trillion federal budget would wrap the world 13,000 times in
one-dollar bills. And that, fellow taxpayers, is a lot of money.
***********************************************************************************************************************************************************
The information contained in this newsletter is provided by
Mostad & Christensen, Inc. The information is of a general nature and
should not be acted upon in your specific situation without further details
and/or professional assistance. For more information on anything in this
newsletter, or for assistance with any of your tax, business, or financial
strategy concerns, contact our office.
Securities and advisory services offered through National
Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser.
Janell Israel & Associates and NPC are separate and unrelated companies.
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