Advanced Planning Tax Presentation

Presented by: Greg Lewis, Shareholder

Date: December 5, 2015

Timing Income & Deductions to your Tax Advantage

The Alternative Minimum Tax (AMT)

Home-Related Breaks

Charitable Donations

Limit on Itemized Deductions

Additional 0.9% Medicare tax

THE ALTERNATIVE MINIMUM TAX (AMT) Separate tax system that limits some deductions

& disallows others State & local income tax deductions Property tax deductions Misc. itemized deductions subject to the 2% of AGI

Investment advisory fees Unreimbursed employee business expenses

HOME-RELATED BREAKS Property tax deductions

Before paying your bill early, review your AMT situation Mortgage interest deduction

Deduct interest on up to a combined total of $1M or mortgage debt incurred to purchase, build, or improve your principal and 2nd residence

Home equity debt interest deduction Can be used for any purpose (debt limit of $100K) Consider using a home equity loan or line of credit to

pay off credit cards or auto loans Interest isn’t deductible and rates may be higher

CHARITABLE DONATIONS Qualified charities are generally fully deductible

Regular tax AMT purposes

Appreciated publicly traded stock you’ve held more than 1 year Deduct current fair market value Avoid capital gains tax you’d pay if you sold property

Subject to tighter deduction limits Excess contributions can be carried forward for up to 5 years

LIMIT ON ITEMIZED DEDUCTIONS If your AGI exceeds the applicable threshold,

certain deductions are reduced by 3% of the AGI amount that exceeds the threshold Not to exceed 80% of allowable deductions

Thresholds for 2015: $258,250 (single) $284,050 (head of household) $309,900 (married filed jointly) $154,950 (married filing separately)

ADDITIONAL 0.9% MEDICARE TAX Applies to FICA wages and net self-employment

income exceeding $200K/year $250K/year for joint filers $125K/year for separate filers

Family & Education Tax Breaks Make Raising Kids Less Costly

IRAs for Teens

The “Kiddie Tax”

529 Plans

IRAs FOR KIDS Many years to let accounts grow tax-deferred or tax-free

2015 contribution limit is the lesser of $5,500 or 100% of earned income

Traditional IRA contribution typically are deductible

Roth IRA contributions are not deductible, but qualified distributions will be tax-free

529 COLLEGE SAVINGS PLANS

Prepaid tuition program to secure current tuition rates or a tax-disadvantaged savings plan to fund college expenses

Contributions are not deductible for federal purposes, but plan assets can grow tax deferred

Some states offer tax incentives in the form of deductions or credits

Distributions used to pay qualified expenses are income-tax free for federal and state purposes Tuition, mandatory fees, books, supplies, room and board

Tax Planning for your Investments: What you need to know Capital Gains & Tax Timing

Loss Carryovers

The 3.8% NIIT

CAPITAL GAINS TAX & TIMING Time is the key to long-term investment success

Timing can have a dramatic impact on the tax consequences of investment activities

Long-term capital gains rate might be as much as 20 percentage points lower than your ordinary income-rate

CAPITAL GAINS TAX & TIMING CONT. Use unrealized losses to absorb gains

To determine capital gains tax liability, realized capital gains are netted against any realized capitalized losses

See if a loved one qualifies for the 0% rate Applies to long-term gain that would be taxed at 10%

or 15% based on taxpayer’s ordinary income rate Consider transferring appreciated assets to adult

children in one of these tax brackets Sell the assets at 0% rate

LOSS CARRYOVERS Deduct $3K ($1500 for married taxpayers filing

separately) of the net losses per year against dividends or ordinary income (wages, self-employment, business income and interest) if net losses exceeds net gains

Carry forward excess losses indefinitely

THE 3.8% NIIT Taxpayers with modified adjusted gross income

(MAGI) over $200K/year may owe the net investment income tax $250K/year for joint filers and $125K/year for

married filing separately

NIIT = 3.8% of the lesser of your net investment income or the amount by which your MAGI exceeds the applicable threshold

WHATS THE MAXIMUM CAPITAL GAINS TAX RATE?

Assets held 201512 months or less (short term)

Taxpayer's ordinary income tax rate

More than 12 months (long term)  39.6% ordinary-income tax bracket 20%25%, 28%, 33%, or 35% ordinary-income tax bracket 15%10% or 15% ordinary-income tax bracket 0%Some key exceptions  Long-term gain on collectibles, sch as artwork and antiques 28%Long-term gain attributable to certain recapture of prior depreciation on real property 25%

Implement a Robust Tax Plan Projecting Income

Depreciation

NOLs

PROJECTING INCOME Deferring income to next year

Cash method of accounting: defer billing for products or services

Accrual method: delay shipping products or delivering services

Accelerate deductible expenses into the current year Cash-basis taxpayer may make a state estimated tax

payment by Dec. 31 (deduct this year rather than the next)

DEPRECIATION Section 179 Expensing Election

Deduct cost of purchasing eligible new or used assets (equipment, furniture, off-the-shelf computer software) rather than depreciate over a number of years

Expensing limit for 2015 is $25K

DEPRECIATION CONT. 50% bonus depreciation

Additional 1st year depreciation allowance expired 12/31/14, with a few exceptions

Congress may revive bonus depreciation

DEPRECIATION CONT. Cost Segregation Study

Recently purchased or built a building or are remodeling existing space

Identifies property components that can be depreciated much faster, increasing your current deductions

NET OPERATING LOSS (NOLs) Operating expenses and other deductions for the

year exceed revenues

NOL may be carried back 2 years to generate a refund

Any loss not absorbed is carried forward up to 20 years to offset income

Questions