Tax Tips and Organizer

Income Tax Organizer

Organizer.doc (238KB)

Our tax organizers are a useful tool for gathering and documenting tax preparation records. Please keep in mind the organizers are designed to address most taxpayers needs but may not incorporate a unique requirement or recent revenue code modification.

Tax Tips

1. Congress enhanced “dot.com” AMT tax credit relief.
   Relief continues for taxpayers saddled with unrecovered AMT tax credits leftover from the dot.com boom-bust. Legislation authorizes taxpayers to collect refunds up to 100% of their incentive stock option (ISO) related alternative minimum tax credits. The maximum annual refund equals 50% of qualifying credits subject to certain requirements. Congress also made this credit available to all income levels. Previously, taxpayers were disqualified if their incomes exceeded prescribed thresholds.
2. Tax planning opportunity.
   Through 2012, taxpayers age 24 or older may qualify for a zero capital gains tax rate. The exemption applies to total taxable income below $34,000. To reduce your tax exposure, as the economy improves, evaluate gifting highly appreciated assets to adult children with taxable incomes under the qualifying sum.
3. Capital gain exemption on the sale of principal residence reduced for nonqualified use.
   An individual taxpayer may exclude up to $250,000 ($500,000 if married filing a joint return) of gain realized on the sale or exchange of a principal residence. To be eligible for the exclusion, the taxpayer must have owned and used the residence as a principal residence for at least two of the five years ending on the date of the sale or exchange. Under legislation passed in July, 2008, gains from the sale or exchange of a principal residence allocated to periods of nonqualified use will no longer be tax exempt.
   • Nonqualified use means any period (not including any period before January 1, 2009) during which the property is not used by the taxpayer or the taxpayer's spouse or former spouse as a principal residence. For purposes of determining periods of nonqualified use, (i) any period after the last date the property is used as the principal residence of the taxpayer or spouse (regardless of use during that period), and (ii) any period (not to exceed two years) that the taxpayer is temporarily absent by reason of a change in place of employment, health, or, to the extent provided in regulations, unforeseen circumstances, are not taken into account.
4. Maximum Contributions to Retirement Plans for 2012.
   IRAs (regular and Roth) $5,000, age 50+ $6,000. 401(k) and 403(b) accounts: $17,000, age 50+ $22,500. SIMPLE IRAs $11,500, age 50+ $14,000. SEP-IRA and Solo-401k $50,000.
5. Deductible IRA/Roth contributions (2012).
   For one-income couples, the maximum income allowed for making deductible or Roth contributions was raised by $4,000 ($173,000-$183,000). Single filer income threshold for allowable Roth contribution is 110,000-$125,000.
6. If you are required to make estimated tax payments to California...
   ...you must “front load” your quarterly payments. The first and second quarter payments represent 70% of your obligation; no payment is required for the third quarter. Remaining 30% is due with the fourth quarter payment.
7. Additional standard deduction for real property taxes.
   If you normally file your tax return using the “standard deduction” and pay property taxes on your home, you generally receive zero income tax savings from the property tax payment. You are now allowed to increase your standard deduction by $500 ($1,000 in the case of a married individual filing jointly) to account for a portion of your property tax payment.
8. College tuition tax credits enhanced.
   The first four years of college or vocational school tuition and materials qualify for federal income tax credits up to a maximum of $4,000 per year. Forty percent of the credit qualifies for a tax refund even if the taxpayer has a zero tax liability. Credits are reduced for parents with incomes above $160,000 (married).