The deduction lowers your taxable income and the earnings are tax-deferred until you receive distributions after your retirement. The maximum allowable deduction for 2009 is $16,500 plus an additional $5,500 if you are over 49 years of age. If your employer offers a matching contribution, you receive an immediate tax-deferred return on investment as well as a reduction of your wages on your W-2.
In most cases, you can deduct the interest on a home equity loan or line of credit on Schedule A of your 1040, no matter how you used the proceeds. Inquire of your Budwitz & Meyerjack professional as to the restrictions on the deductibility.
You can get a charitable deduction for the fair value of the stock and avoid paying any tax on capital gains. For example, if you donate 100 shares of Acme Company that you purchased five years ago for a total of $5,000 but had a value of $25,000 on the day the donation was made, you get a charitable deduction of $25,000 and you avoid paying tax on the $20,000 capital gain you would have recognized if you had sold the stock. NOTE: You must give the stock directly to the charity. Don't sell the stock and give the money to the charity.
For example, medical expenses can rarely be taken as an itemized deduction on Schedule A due to the 7.5% of AGI limitation, but through your company's cafeteria plan, you can fully deduct your medical expenses from your W-2 wages. The only catch is that if your unreimbursed medical expenses for the year are less than what you set aside from your wages, the difference is forfeited. Another example is dependent care. You may elect to have dependent care costs deducted from your W-2 wages in lieu of claiming the dependent care credit on your tax return. This may be more advantageous based on your personal tax situation. You should consult your Budwitz & Meyerjack professional as to which alternative is best for you.
The new 15% tax rate on dividends makes this option more appealing than in the past. NOTE: The dividends will still be subject to "double taxation," so taking a dividend may not be the right option for you. You should engage your Budwitz & Meyerjack professional to assist you in making the correct decision.
The IRS recommends that you file this way, and you get your refund in about half the time. Ask your Budwitz & Meyerjack professional to electronically file your income tax return (E-File). We are an IRS authorized Electronic Return originator.
Under the Pension Protection Act of 2006, if you are over the age of 70 ½, you can exclude from gross income distributions from individual retirement accounts (IRA’s) up to $100,000 if the distribution is made to a qualified charity. This counts toward your required minimum distribution for the year.