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Leslie Daff, JD, MBA - Orange County Estate Planning Lawyer

Friday, December 23, 2011

Tax & Estate Planning Tip #2: Use Them or Lose Them...Expiring Tax Breaks

If you act quickly, you may be able to take advantage of the following tax breaks which expire at the end of 2011.

Residential Energy Credits, up to a lifetime cap of $500, are available for many energy improvements you make to your home.  Examples include credits up to $200 for windows, $50 for circulating fans, and $150 for hot water heaters, plus 10% of insulation and exterior door expenditures and 30% of heat pump, air conditioner, and solar power expenditures. 

The $4,000 deduction for higher education tuition and fees, not including books or room and board, ends this year.  The deduction cannot be claimed if you claim one of the education credits for the same expenses.  If you, your spouse, or your dependents are taking courses after the first of the year, you may want to pay these expenses this month. 

100% Bonus Depreciation is not available in 2012.  This provision allows the full cost of new business-use property to be depreciated in the year of purchase.  This break primarily favors big businesses, but it is also being used by individuals buying SUVs (and other vehicles with a gross vehicle weight in excess of 6,000 pounds).  They can fully depreciate their vehicles in the year of purchase.  The $25,000 limitation that usually applies to SUVs is circumvented by this tax break for the rest of this month.

Individual Retirement Account (IRA) Distributions to Charity.  If you are over 70 ½ and wish to donate to charity, reduce the amount of IRA included in your estate when you die,  and avoid income tax on this year’s required minimum distribution from your IRA, you can donate up to $100,000 directly from your IRA to charity.  By not reporting the distribution on your tax return, it is possible less of your Social Security benefits will be subject to tax and more itemized deductions can be claimed. 

There is still one week left to take advantage of these “gifts.”  Although Congress sometimes belatedly extends provisions for another year, given the government’s financial condition and the inability of Congress to enact legislation, this year may be different.

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