Ask the Advisor – 12/18/2007


Here’s this week’s discussion from Hoboken411’s Financial Advisor:

2007 Year-End Planning

ask-the-advisor-hoboken411-logo-small.jpgAlthough a New Year is fast approaching, you still have time to implement several tax and financial planning related strategies to make the most of 2007 and to soundly position yourself for 2008 and beyond.

Last-minute strategies for saving, managing and gifting your money. Here are certain strategies you may or may not be aware of, that being said, our aim is to provide updates on any relevant changes that came into effect in 2007 and remind you about crucial deadlines and “to do’s” for now and the future.

Tax Update

Time Could Be Money When It Comes To Recognizing Gains

Investment income, such as that from capital gains and dividends, is taxed at a different rate than earned income. Because these rates are subject to change, you might be able to take advantage of this by planning when to recognize certain long-term capital gains.

2007 Capital Gains Rates:

  • 28% For gains on collectibles and on qualified small business stock
  • 25% On certain gains from the sale of some types of depreciable real estate property
  • 15% For all additional gains

Check out some more year-end tips after the break!

Strategy Solution

Different rates could apply to long-term capital gains in 2007 through 2010, so it’s important to check with a tax and financial consultant on what you owe and to plan when it might be advantageous to recognize certain gains, if possible.

It’s always advisable to speak with your tax advisor to better understand how any tax planning strategy might affect your particular situation.

AMT Changes: How To Address Them

The concurrent tax system that is calculated by disallowing some of the exemptions, deductions and credits that you use to calculate your standard income tax is what we have come to know as Alternative Minimum Tax. So you will owe whichever tax is higher, the AMT or your “normal” expected amount. Taxpayers with children, mortgages, deductible expenses and those who live in high-tax states are usually subject to higher AMT rates.

The AMT exemption amount (the amount that is not included in AMT income) has decreased to $33,750 ($45,000 if married filing jointly or qualifying widow(er) and $22,500 if married filing separately).

The minimum exemption amount for a child under age 18 has increased to $6,300.

Strategy Solution

If is critical to consult your tax advisor before year-end to determine if you will be subject to the AMT. If you are, then instead of trying to increase your deductions in 2007, your tax advisor may suggest that you try to decrease your “non-AMT” deductions and increase your income. This is the exact opposite strategy you would implement if you were not subject to AMT.

In the queue…

Portfolio Updates, rebalancing, shifting income and tips for retirees.

For more specific discussion and to schedule a private consultation with The 411 Advisor:
E-Mail: AskThe411Advisor@GMail.Com
Call (212) 643-5890 or (800) 223-4565

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