Tax Planning the need to keep up with tax law changes

Background

It is imperative that you keep up with the tax law changes that affect your finances and the best way to do that is to partner with your CPA or tax professional or your choice. Lets take for example the extended provisions that had been approved the last minute by congress and close to year end.  To mention a few these are:  the increased Alternative Minimum Tax (AMT) exemption amounts, the State/Local Sales Tax  deduction, the Mortgage Insurance Premiums deductions, School Teacher Expenses, and the Qualified Charitable Distributions from IRAs.  Lets discuss each one of them in detail here.

• The State/Local Sales Tax deduction is an election in lieu of deducting state income taxes.  It is mostly used by taxpayers residing in Washington, Texas, Nevada, Florida, and other states where there is no state income tax. You must itemize deductions to take advantage of this deduction.
• The Mortgage Insurance Premium deduction applied to homeowners who made down payment of less than 20% of their homes' value and were required to carry PMI.  These premiums were deductible similar to mortgage interest. 
• The School Teacher Expenses provision provided a $250 deduction for teachers, counselors, principals, and aids for books, supplies and other materials.
• Qualified Charitable Distributions provision was very popular among taxpayers.  It allows individuals who are age over 70 1/2 to make a direct charitable gift from their IRA in lieu of taking a required minimum deduction.

These provisions expired at the end of 2011. 

How can your CPA do for you?

Your CPA can be able to monitor regularly, at least quarterly, your financial situation to see if you are going to be affected by any tax-law changes.  He can also help cope with life-changing events such as marriage, divorce, parenthood or new business launch. 

BY taking the necessary steps as soon as the need arises, rather than delaying action until the end of the year, you can better protect your financial interest. 

Hit Counter