When driving down the road, do you concentrate on looking through the windshield and anticipate what could happen, or do you concentrate on the rearview mirror and what has already happened? Now think about how you presently handle the preparation and filing of your personal tax return. Are you primarily looking in the rearview mirror or are you looking through the windshield when is comes to taxes? If you are looking through the windshield and looking for planning tips to help reduce your tax liability this guide is for you. Make Contributions To Your Retirement Accounts Take advantage of making contributions to your retirement accounts. For 2009 the limits on IRA contributions are $5000, and for those 50 and older in 2009 the limits are $6000. This applies to both traditional and Roth IRAs.  You have until April 15th to make those contributions, but why wait. Make the contributions now and get those dollars growing tax deferred today.


The limits for contributions to 401(k)s and 403(b)s have increased for 2009. For those younger than 50, the limit on their employee contributions is $16,500, and those 50 and older they are allowed an additional $5,500 catch up contribution for a total employee contribution of $22,000. Look at the contributions you have made year to date, and make any adjustments needed to your payroll deductions for your 401(k) or 403(b). If you don’t make those contributions by December 31st, it’s too late.
Stock Options Exercising employer granted stock options in a volatile market can be tricky. Upon exercise you create ordinary income, and if the stock price subsequently falls, the IRS doesn’t give you a break. If you have shares in the money the market value above exercise cost is taxable, but if the shares later drop in value, the amount of ordinary income is not reduced.

Alternative Minimum Tax The AMT exemption amounts for 2009 are $46,700 for single and head of household filers, $70,950 for married people filing jointly and for qualifying widows or widowers, and $35,475 for married people filing separately. The exemption amounts mean that this amount of AMT taxable income is not subject to the AMT. Income over these amounts may be subject to AMT. Unlike the ordinary tax rates, the AMT has only two tax brackets. The AMT tax rates are 26% on the first $175,000 of AMT taxable income, and 28% on the remainder of AMT taxable income.

0% Capital Gains Rates  For those in the 10% and 15% marginal tax brackets, the capital gains tax rate on selling assets held for over one year was 5%. In 2008 and continuing through 2010, the 5% capital gains tax rate drops to 0%. The 15% capital gains tax rate remains unchanged. The same thing happens to the dividend tax rates. The 5% dividend rate goes to 0% for 2008 through 2010. Take Losses on Investment If you have investments that have dropped in value you may be able to sell them and either use the loss as an offset to any gains you have realized on other investments, or use the loss to offset ordinary income. Short term gains and losses are offset against each other, and likewise long term gains and losses offset one another. Next, net short term and net long term gains or losses are offset against each other. If there are any unused losses, $3000 per year can be used to reduce ordinary income until the net loss is completely utilized.

Your Chance to Deduct Real Estate Taxes Here is one change that most people, even many accountants are not aware of.  Prior to 2008 only taxpayers that itemized their deductions had the opportunity to deduct their real estate taxes. Now even those taxpayers that claim the standard deduction can deduct a portion of their real estate taxes, $500 for single taxpayers and $1000 for married filing joint taxpayers. This break, originally for just the 2008 tax year, was part of the Housing Assistance Act passed by Congress in July of last year. In October of 2008 as part of the financial bailout bill the tax break was extended for 2009. Make sure you take advantage of this tax break.

Kiddie Tax Gets Tougher  Parents of children that have assets in the child’s name or that have assets in an UTMA account need to be aware of the Kiddie Tax, and the treatment of unearned income received in the child’s name. The Kiddie Tax doesn’t apply to income the kids may make from jobs they have; that’s earned income. It applies to interest, dividends, and capital gains on savings and investments the kids have. The income threshold has increased to $1900, and the age is raised from 19, unless the child is a student and dependent for tax purposes, then the age is raised to 24.  This makes it more difficult to shift appreciated assets to your children to take advantage of lower capital gains rates.  For the first $1900 in unearned income of a child in 2009, the first $950 isn’t taxable due to the child’s $950 standard deduction, with the next $950 being taxed at the child’s tax rate. Any unearned income above $1900 is taxed at the parents’ tax rate.

Bunching Your Tax Deductions Take steps to use your out of pocket tax deductible expenses to allow you to use them in one tax year by bunching them together. In the following tax year use your standard deduction. Then in the third tax year, bunch deductions again to get your itemized deductions above the standard deduction. Keep in mind this is not just paper shuffling. These expenses have to be actually paid in the year you want to take the deduction.
Long Term Care Premium Deduction In 2009 the maximum amounts available as a medical expense deduction for long term care insurance premiums have increased. The deduction limits which are based on age are as follows:

Age 40 + younger                 $  320
Age 40 but not over 50         $  600
Age 50 but not over 60         $1190
Age 60 but not over 70         $3180
Over age 70                         $3980

A C Corporation can deduct 100% of the LTC premiums, and there is no tax on the benefit paid to the employee.

Taxing Phantom Income - If you don’t need all of your interest income to cover ongoing living expenses, take proactive steps to reduce your taxable income.  You can shift taxable investments into tax deductible accounts. Remember interest income comes in at your highest marginal tax bracket and may even push you into a higher tax bracket if you aren’t careful. Therefore tax deferred accounts may be very beneficial to reduce future tax liability.

Lacking Coordination…at what cost? - Failing to have all of your financial affairs, including your tax planning, coordinated can lead to confusion and higher costs. The higher costs can come in the way of higher taxes, improper allocation of your assets, improper titling of your accounts, and a reduction of the amount of your wealth which may ultimately pass to your family. What is the lack of coordination costing you?

This material is not to be intended as tax advice.
Please see your tax advisor for personal recommendations.
Lineweaver Financial Group, 9035 Sweet Valley Drive, Valley View, Ohio 44125.
1-888-313-4009 ? www.Lineweaver.net
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