Year End Planning for Massachusetts Clients

As we enter the final weeks of the calendar year we post this blog article to inform Massachusetts consumers of a few things they can do to reduce taxes and keep their retirements accounts active.
Tax planning basically involves two things: deferring income and reducing taxable income. Deferring income may seem counter intuitive, but it can reduce your taxable income this year. Defer income to 2012 if you can; any year-end bonus that you are entitled to could be requested or given in January. Thus, you will not be required to pay the tax until 2012.

Pay deductibles in 2011; these could include medical bills, interest payments, state and local taxes, including property taxes. Tax rates are set to remain the same for 2012; there are six tax rates, 10%, 14%, 25%, 28% and 35%. Long term capital gains will be taxed at a maximum rate of $15% next year too, however, if you are in the 10% or 15% tax bracket, you will pay 9% on capital gains! Knowing all of this may help you in year end tax planning.
If you had to pay the alternative minimum tax (AMT) in 2010, beware of it for this year; if your income went up unexpectedly, look into this before year end. The AMT disallows various deductions, so check with your tax advisor or a computer tax program.
Massachusetts’s small business owners should consider purchasing qualifying capital because in 2011 you can take advantage of the 1005 depreciation deduction. This goes down to 50% for 2012 acquired property. The maximum amount for 2011 is $500,000, however, in 2011, the maximum amount is $139,000.
Massachusetts home owners should consider making energy efficient home improvements because this deduction goes from 10% this year to 0 in 2012. Such improvements include certain roofs, windows, doors, insulation, energy efficient furnaces and hot water heaters, 2011 is the last year that folks over 70 to make a charitable contribution from your IRA or other deferred retirement account and not pay any tax on the distribution. This applies up to $100,000. This also counts towards your minimum required distribution for 2011.
Each year you must take at least a minimum IRA or 401k distribution for everyone that is over 70 ½. There is a steep penalty for those that fail to do so. Most plans administrators, such as Fidelity, Schwab, Vanguard or your employer, will complete the calculation for you.
Finally, what should our Boston bankruptcy and Massachusetts bankruptcy clients do with respect to their retirement accounts? Since most retirement accounts are bankruptcy protected in Massachusetts, they should consider contributing as much as possible. In 2011, the IRA contribution limits is $5,000, and $6,000 if you are over 50. This is the same for Roth IRA accounts. There are phase For our 401k clients, the limits are $16,500, and $22,000 if you are over 50. 403(b) and Section 457 participants have the same limits. This is different for “highly compensated employees.”
For articles regarding Massachusetts motor vehicle accidents, Boston car accidents and motor vehicle injuries in Massachusetts, see our Massachusetts injury blog.