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Timely Financial Planning Article
LAST MINUTE TAX TIPS
Here’s a potpourri of rules and ideas that are important for year-end planning.
Securities Sales To realize a gain or loss in 2009, the trade date must occur on or before December 31, 2009. Settlement date is irrelevant for publicly traded securities.
The limit on the deduction of capital losses in excess of capital gains is $3,000. Any net capital losses in excess of $3,000 are carried over into 2010. Both short- and long-term losses are counted on a dollar-for-dollar basis. A few years ago, long-term losses were worth only $.50 on the $1. No longer.
The holding period to achieve a long-term capital gain or loss is now more than twelve months. Count the period from trade date to trade date. Whether a gain is short- or long-term does make a difference. The date a long-term gain is realized also makes a difference. In general, net short-term gains are subject to a 35% maximum rate, while net long-term gains are taxed at a maximum of 15%. However, some gains may be subject to a 25 or 28% rate, such as gains on the sale of art or collectibles and gains on certain depreciated real property.
Retirement Plans If you are a calendar year taxpayer, the deadline for establishing a qualified retirement plan for deductions against 2009 income is December 31, 2009. The contribution need not be made until the tax filing deadline of the taxpayer’s return. Note; however, that a SEP plan can still be established for 2008 deductions up until the return due date in 2009.
In order for a distribution to qualify as a lump sum distribution, 100% of the balance to the credit of the employee must be distributed in one taxable year. If you have retired this year, make sure that you received (or will receive by year-end) everything you have coming under your former employer’s qualified retirement plan.
Charitable Contributions Many people make their annual charitable contributions during the holidays. If you’re going to make a cash contribution, mail the check by December 31, 2009 to qualify for a 2009 deduction. Giving a personal note or I.O.U. to the charity won’t qualify for a deduction; but, donating with a credit card does.
Making gifts of securities is a very effective way to make charitable contributions. Charities are happy to receive odd lots. Donations of long-term capital gain property are deductible based on fair market value. It doesn’t make sense to donate short-term capital gain property; your deduction will be limited to your basis. Also, it doesn’t make sense to donate securities with losses; sell the stock and donate the cash. To claim a 2008 deduction, the security must actually be transferred to the charity before December 31, 2009.
Check in with your financial planner near the end of the year to see what deadlines and opportunities apply to your particular financial situation.
This material was prepared by Raymond James for use by Laurence E Menna, Financial Planner of Raymond James Financial Services, Inc. Member FINRA/SIPC
Laurence Menna
Financial Planner
1601 New Stine Road
Suite 180
Bakersfield, CA 93309
Phone: 661-837-8500
Fax: 661-837-8926
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