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Maximize your use of the new tax cuts brought about by the massive Economic Growth and Tax Relief Act of 2001, passed by Congress and signed by the President this past June;
Coordinate capital gains realized both before and after the economy downturn of September 11th,
Respond quickly to the Economic Stimulus Tax Bill as soon as it is passed by Congress this fall, so that there is time before year-end to maximize tax benefits that will immediately become available upon passage.
Tax Relief Act of 2001: The tax-cuts brought about by the Economic Growth and Tax Relief Reconciliation Act of 2001 are truly historic. Most of the benefits arising form this new law, however, won't "just happen to you." You must be proactive to be entitled to--or to effectively use--many of these changes. Here is a list of some of the new benefits that require preparation to maximize your tax savings:
Tax rates have dropped 0.5 percent in 2001 and will drop again by 0.5 percent in 2002, from the former 28, 31, 36 and 39.6 percent income tax brackets.
Starting in 2002, the annual
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contribution limit for individual retirement accounts (IRAs) increases to $3,000, with those 50 and older allowed to make special "make-up" contributions;
Starting in 2002, education IRAs can accept up to $2,000 each year, up from $500 in 2001; qualified state tuition programs are also made much more generous;
The alternative minimum tax (AMT) exemption increases for 2001 and 2002 to $4,000 for joint filers and $2,000 for others;
The estate tax begins its slow decrease starting in 2002, requiring many taxpayers to draft new will provisions while adopting revised gift-giving strategies;
The IRS continues its massive reorganization, creating not only new rules for taxpayers who anticipate trouble with the IRS, but also new opportunities to "audit-proof" this years returns.
Coordinating capital gains and losses.
The economic turmoil of 2001 has brought with it a new need to coordinate your capital gains and losses in investment and business situations to maximize both your profits and your tax savings. This involves an often complicated process of determining short term gains (taxed as ordinary income), long-term gains, short-term losses, long-term losses, depreciable gain, and gains and
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