NICHOLAS G. VARDALOS & COMPANY, LLC
CERTIFIED PUBLIC ACCOUNTANT
► Tax Saving Techniques
Some generally recognized financial planning tools that may help you reduce your tax bill.
Charitable Giving - Instead of selling your appreciated long-term securities, donate the stock instead and avoid paying tax on the unrealized gain while still getting a charitable tax deduction for the full fair market value.
Health Savings Accounts (HSAs) - If you have a high deductible medical plan you can open an HSA and make tax deductible contributions to your account to pay for medical expenses. Unlike flexible spending arrangements (FSAs), the contributions can carry over for medical expenses in future years.
ROTH IRAs - Contributions to a ROTH IRA are not tax deductible but the qualified distributions, including earnings are tax-free.
Municipal Bonds - Interest earned on these types of investments is tax-exempt.
Own a home - most of the cost of this type of investment is financed and the interest (on mortgages up to $1,000,000) is tax deductible. When the property is sold, individuals may exclude up to $250,000 ($500,000 if married jointly) of the gain.
Retirement Plans - Participate in your employer sponsored retirement plan, especially if there is a
matching component. You will receive a current tax deduction and the tax-deferred compounding can add up to a large retirement savings.
► Deducting Mortgage Interest
If you own a home, you can claim a deduction for the interest paid. To be deductible, the interest you pay must be on a loan secured by your main home or a second home. The loan can be a first or second mortgage, a home improvement loan, or a home equity loan.
► Capital Gains and Losses
Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. The IRS says when you sell a capital asset, such as stocks, the difference between the amount you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. While you must report all capital gains, you may deduct only your capital losses on investment property, not personal property.
► Coverdell Savings Accounts
A Coverdell Education Savings Account (ESA) is a savings account created as an incentive to help parents and students save for education expenses.
► IRA Contributions
If you haven’t contributed funds to an Individual Retirement Arrangement (IRA) for last tax year, or if you’ve put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April 15 due date for filing your tax return for last year, not including extensions.
► ROTH IRA Contributions
Confused about whether you can contribute to a Roth IRA? The IRS suggests checking these simple rules.
ROTH IRA Contributions
Confused about whether you can contribute to a Roth IRA? The IRS suggests checking these simple rules:
To contribute to a Roth IRA, you must have compensation (e.g., wages, salary, tips, professional fees, bonuses). Your modified adjusted gross income must be less than:
$176,000 — Married Filing Jointly.
$10,000 — Married Filing Separately (and you lived with your spouse at any time during the year).
$120,000 — Single, Head of Household, or Married Filing Separately (and you did not live with your spouse during the year).
There is no age limitation for Roth IRA contributions. Unlike traditional IRAs, you can be any age and still qualify to contribute to a Roth IRA.
3. Contribution Limits
In general, if your only IRA is a Roth IRA, the maximum current year contribution limit is the lesser of your taxable compensation or $5,000 ($6,000 for those age 50 or over).
The maximum contribution limit phases out if your modified adjusted gross income is within these limits:
$167,000-$176,000 — Married Filing Jointly
$0-$10,000 — Married Filing Separately (and you lived with your spouse at any time during the year)
$105,000-$120,000 — Single, Head of Household, or Married Filing Separately (and you did not live with your spouse)
4. Contributions to Spousal Roth IRA
You can make contributions to a Roth IRA for your spouse provided you meet the income requirements.
* Please consult with your tax adviser before making a final decision as some information may have changed due to IRS rulings.
YOUR TRUSTED ADVISOR
Nicholas G. Vardalos & Company is a full service accounting firm serving clients throughout the Chicago metropolitan area, northwest Indiana and southwest Michigan.