Gelman, Rosenberg & Freedman, CPAs Year-End Tax Planning Seminar

1. Gelman, Rosenberg & Freedman, CPAsYear-End Tax Planning Seminar Presented By: Walter Deyhle, CPA, CFP, ABV, CM&AA Where Personal Attention Will Never Become Obsolete!

2. Rules • No throwing things! • No question is unimportant! • Do not hold questions! • Try not to be political! • Turn off phones, etc.

3. Our Process • Tax organizers • E-filing • Copies of returns • Portal (coming soon)

4. News Affecting Taxes • Deficit > $1.4 trillion • Bush tax cuts expire 12/31/2010 • Funding for War in Iraq & Afghanistan • Funding for Health Care reform

5. Federal Expiring Provisions

6. Federal Expiring Provisions (cont’d)

7. Federal Expiring Provisions (cont’d) • Lowest tax rate to increase from 10% to 15% • Top tax rate to increase from 35% to 39.6%

8. Federal Expiring Provisions (cont’d)

9. Estate & Gift Tax

10. Estate Tax Basics • Unified gift & tax system • Current exclusion $3.5M per person • Annual gifting of $13,000 • Exclusion for education and medical • payments • Step–Up Basis • Top tax rate 35%

11. Roth IRA

12. Convert to a ROTH IRA? Tax Deductible No Tax Deduction Qualified Distributions Taxable Qualified Distributions Tax Free Tax Deferred Growth Tax Free Growth Required Minimum Distribution No Required Minimum Distribution Most Effective When Tax Rate Higher at Retirement Most Effective When Tax Rate Lower at Retirement

13. When To Convert • Do not need IRA to pay tax • Expect to be in a higher tax bracket • in retirement • Do not need IRA in retirement • Expect to pay estate taxes

14. When To Convert (cont’d) • No required minimum • distributions • Pass to heirs • Heirs have required RMD

15. Housing Credit

16. Housing Credit • Worker, Homeownership, and Business • Assistance Act of 2009 • Income limit increased • $125,000 / $225,000 • P&S by 4/30/10 – close before 7/1/10

17. Housing Credit (cont’d) • Long-time resident • 5 consecutive years / last 8 • lesser of 10% or $6,500 • Homes up to $800,000

18. Residential Energy Credit

19. Residential Energy Credit • Removes individual item caps • Increases limit to $1,500 • Increases from 10% to 30% • Prior $500 not counted • For 2009 & 2010 installations • Required energy efficiency increased

20. House Health Act

21. House Health Act • Employers with over $750,000 of • payroll must provide 72.5% single or • 65% family • Individual required to get insurance, if • not 2.5% tax

22. House Health Act (cont’d) • 5.4% surtax $500,000/$1,000,000 • effective 2011

23. 2011

24. Rates for the “Rich” • Rich is: • $250,000 MFJ • $200,000 Single • 35% to 39.5% • 33% to 36% • Capital gains & qualified • dividends to 20% • Possible top marginal rate 45%

25. Other Items Aimed At “Rich” • Reinstate 3% phase-out of itemized • deductions • Reinstate 3% phase-out of exemptions

26. Kiddie Tax • $950 allowance • Earned income taxed at child’s rate • $1,900 of investment income taxed • at child’s rate • Excess investment income taxed at • parent’s rate

27. Kiddie Tax (cont’d) • Applies to children age 18 and younger • and “children” age 23 and younger • who are full-time students

28. Other Items of Interest • Sale of residence rules • Capital gain/loss rules • Mortgage interest rules • Life settlements

29. Alternative Minimum Tax

30. Questions? 4550 Montgomery Avenue, Suite 650 N Bethesda, MD 20814 301-951-9090 • www.grfcpa.com Walter Deyhle, CPA, CFP, ABV, CM&AA Gelman, Rosenberg & Freedman, CPAs wdeyhle@grfcpa.com Where Personal Attention Will Never Become Obsolete!