How to Avoid Tricky Tax Traps:
From January 2005
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They might want to look at stocks that pay high dividends because those corporate payouts are taxed at a top rate of 15 percent. Stock options aren’t in the news as much as a few years ago, but Colson also talks with clients about the relative risks of selling in one shot for a high return or spreading sale of the options over several years to keep the taxes low.
“At the million-dollar range, you can diversify your portfolio more. A person at the $100,000 range is really just looking at mutual funds,” she says.
“It might even make sense to pay off the mortgage and forego that deduction, if you’re no longer itemizing and your other investments aren’t earning any more than the mortgage interest rate,” says Colson.
All Business
The small-business owner has a great advantage over most other taxpayers: Many more purchases can be write-offs, especially now. A small business can expense up to $102,000 in equipment purchases for 2005 and the next two years (thank inflation indexing for the unusual number). It will drop to $25,000 in 2008.
But forget what you’ve heard about extra write-offs for SUVs. That advantage got dinged by the American Jobs Creation Act of 2004. It also hurt the clean-fuel tax deduction for hybrid vehicles, which is down to $1,000 from $1,500 last year.
Even so, SUVs, or more accurately any vehicle weighing more than 6,000 pounds, can still be depreciated faster than lighter cars and trucks.
“If you can use a big vehicle in your business, and you have the income, why not?” says Ron Rienks, an independent CPA in Sacramento. “Real-estate people, for instance, they want a big vehicle to haul families to show homes.” Just be careful the vehicle is used at least 50 percent of the time for business, Rienks warns.
Continued...
“At the million-dollar range, you can diversify your portfolio more. A person at the $100,000 range is really just looking at mutual funds,” she says.
“It might even make sense to pay off the mortgage and forego that deduction, if you’re no longer itemizing and your other investments aren’t earning any more than the mortgage interest rate,” says Colson.
All Business
The small-business owner has a great advantage over most other taxpayers: Many more purchases can be write-offs, especially now. A small business can expense up to $102,000 in equipment purchases for 2005 and the next two years (thank inflation indexing for the unusual number). It will drop to $25,000 in 2008.
But forget what you’ve heard about extra write-offs for SUVs. That advantage got dinged by the American Jobs Creation Act of 2004. It also hurt the clean-fuel tax deduction for hybrid vehicles, which is down to $1,000 from $1,500 last year.
Even so, SUVs, or more accurately any vehicle weighing more than 6,000 pounds, can still be depreciated faster than lighter cars and trucks.
“If you can use a big vehicle in your business, and you have the income, why not?” says Ron Rienks, an independent CPA in Sacramento. “Real-estate people, for instance, they want a big vehicle to haul families to show homes.” Just be careful the vehicle is used at least 50 percent of the time for business, Rienks warns.
Continued...
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