Newsletter - First quarter 2015

Source: AICPA/Kiplinger/SmallBuztax/CCH/IRS/States/Various Magazines

Updates on Taxes For Year 2014 and 2015 

The employer Affordable Health Care ACT (ACA) mandate starts to kick in. 

Starting in 2016, firms with 50+ full time-equivalent workers will be subject to the pay-or-play rules, and the coverage offer will be expanded to dependents, including kids under age 26.

The 20 % top rate on dividends and long-term gains starts at a higher level for 2015...singles with taxable income above $413,200 and joint filers above $464,850. The 3.8% Medicare surtax boosts the rate to 23.8%. The regular 15% maximum rate applies for filers with incomes below these amounts, except that filers in the 10% or 15% income tax bracket still get the special 0% rate.

The basic Medicare Part B premium remains $104.90 per month in 2015. But the upper-income seniors still have to pay higher Part B and D premiums if their modified adjusted gross income for 2013 exceeded $85,000 for single people. The 2015 Part B surcharge doesn’t change, while the Part D add-on rises slightly. The total surcharges on upper-incomers can be as large as $301.60 a month. 

The adoption credit can be taken on up to $13,409 of costs. If the credit is more than a filer’s tax liability, the excess is not refundable. The full $13,400 credit is available for a special needs adoption, even if it cost less. The credit starts to dry up for filers with AGIs over $201,010. 

The standard mileage rate rises to 57.50 cents a mile for business driving in 2015, up 1.5 cents. The rate falls to 23 cents a mile for medical travel and moving and remains at 14 cents for charitable driving. Standard rate users can also deduct the cost of parking and tolls.

Many key dollar limits on retirement plans are a little higher this year: The maximum 401(k) contribution rises to $18,000, up $500 from 2014. Individuals who were born before 1966 are allowed to put in as much as $24,000.

New Equipment and Machinery: Only $25,000 of assets qualifies, down from $500,000, and the $25,000 phases out once more than $200,000 of assets are put in service.

Companies with 100 or more full-time equivalent employees must offer health coverage to full-timers or pay a tax. Full-timers are those employed at least 30 hours-a-week on average, but there’s a good chance this number will be raised.

Minimum wage increase starting January 2015

The minimum wage in Massachusetts has increased from $8.00 per hour, to $9.00 per hour, effective January 1, 2015. Legislation enacted last June calls for three annual one dollar increases in the regular minimum wage. On January 1, 2015, the minimum wage will be $9.00 per The minimum wage law applies to all employees except those being rehabilitated or trained in charitable, educational, or religious institutions; members of religious orders; agricultural, floricultural, and horticultural workers; those in professional service; and outside salespersons not reporting to or visiting their office daily. to the increase to the state's regular minimum wage, the service rate is also increasing, from the current $2.63 per hour, to $3.75 per hour by January 1, 2017.

For further information regarding the Massachusetts state minimum wage, please visit www.mass.gov/mwage. 

 

**********************************************

Newsletter - Fourth quarter 2014

Source: AICPA/Kiplinger/SmallBuztax/CCH/IRSOthers

Pay zero tax on capital gain

ATRA permanently extended the 0% tax rate for long-term capital gains. The 15 % rate was also extended, but single filers with taxable income above $400,000 and joint filers above $450,000 face a maximum 20 % rate for 2014.That’s not a misprint. You can qualify for a 0 % tax rate on some or all of your long-term capital gains realized in 2014. This unique tax break, recently extended by the American Taxpayer Relief Act (ATRA), isn’t necessarily off-limits to taxpayers who are doing ok financially.

Strategy: Figure out how much capital gain you might fit under the threshold. The 0 % rate applies to taxpayers who end up in the 10 % or 15 % regular income tax brackets. For instance, you may qualify for preferential tax treatment if your business incurs a loss or you defer a substantial amount of income to future years. Alternatively, you might shift some of your capital gain assets to your children or grandchildren who are eligible for the 0% tax rate. As part of the “Bush tax cuts,” the maximum tax rate on net long-term gain was lowered from 20 % to 15 %, beginning in 2003.

For taxpayers in the lowest tax brackets, the rate was reduced to 5 %. Subsequent extensions and modifications cut the rate to a rock-bottom 0 % through 2012. If your income drops below the cutoff point, you can find benefit from the 0% rate. For 2014, the threshold is $36,250 for single filers and $72,500 for joint filers.

Exemple: You’re self-employed, a joint filer and in the 33 % bracket. You expect your self-employment income in 2014 to be only $ 50,000. Plus you’ll be able to cut your taxable income to $20,000 through itemized deductions such as mortgage interest, property taxes and gifts to charity.This offers plenty of tax room to maneuver on sales of securities or other assets.

For instance, assume you sell appreciated stock you’ve owned for 10 years at a $50,000 gain. Because your total taxable income of $70,000 ($20,000 + $50,000) is below the $72,500 cutoff, the entire long-term gain is effectively tax-free! Note that it doesn’t have to be an all-or nothing proposition. For instance, say that your taxable income before counting capital gain is $52,500 instead of $20,000. In that case, $20,000 of the gain from the sale of stock ($72,500 - $52,500) qualifies for the 0% rate. The remaining $30,000of gain is taxed at the 15% rate, for a total of $4,500.

If you have no shot at the 0 % rate this year, shift appreciated capital gain assets like stocks and mutual fund shares to low-taxed family members. Any excess is covered by your annual lifetime gift tax exemption ($5.25 million in 2014). However, under the “kiddie tax,” investment income above $2,000 received in 2014by dependent children up to age 24 can be taxed at the parents’ top rate. Also, shifting too much income might affect college aid eligibility. Tip: The 0 % capital gain rate only applies to asset held longer than one year. Short-term gains are taxed at ordinary income rates. 

*******************************************************************************************

Newsletter - First quarter 2014

Tips to get your kids into savings for their retirement

“When we were just starting out in life, our parents told us to start saving money right out of the gate, but we didn’t listen, instead, we ran up our credit card debt, spent more than we earned and bought more house than we could afford. But our kids can and should learn from our mistakes and helping them to start saving now could give them a nest egg or millions instead of thousands.”

Most of you have their kids in their teen age. This is a crucial time to teach them about saving for their own retirement. It is never early to start. With your help, you kid can learn how to be savvy with managing her own money, to later face the important financial decisions she will have to take during her life. 

You can help your kid learn about financial stability by teaching them on how to think and plan for the future, especially when it comes to savings for college, a rainy day or retirement. With your help, you kid can learn how to be savvy with managing her own money, to later face the important financial decisions she will have to take during her life. 

Here are some tips to help them reach their retirement goals:

 Start at 16 – Just $10,000 contributed to a Roth IRA each year for 5 years starting at age 16 could be worth more than a million by the time an adult reaches through the age 65. In a Roth IRA all that growth would be tax-free when withdrawn.

5-10 Percent Rule – Everyone should save a minimum of 10 percent of his or her take home pay.

Shelter Early -- Ideally, an individual should open a Roth IRA account and start saving at the beginning of her career. When that person reaches her peak in earnings (usually around the age 40), she should switch to a tax-deferred account like a 401(k).

 Fun or Fund? – Take half of what would have been spent been on gifts (toys, games, etc.) and invest it in a mutual fund for your child.

Birthday Booster -- Encourage friends and relatives to contribute to the mutual fund account you’ve started instead of buying gifts for birthdays and holidays.

Every Little Bit Helps – Contributing small amounts on a regular basis is a better strategy than waiting to accumulate a larger sum. Get in the habit of saving something regularly.

Use the Refund – Let the government help. Currently the child tax credit is $1,000 per child until they reach age 17. Discipline yourself to save the credit when it is returned to you as a refund.

“It doesn’t take a lot to give your kids long term security. “The magic of compounded interest can do more of the heavy lifting as long as you start early and contribute often.” 

 Note: If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.

We are looking forward to working together to help you realize the benefits of these new changes

Offices