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Featured Advisor

Ed Meek
CEO/Investment Advisor

Edge Portfolio Management


State: IL

At Edge, a low client to advisor ratio allows for personal and customized service for each individual.  Our goal is to work as a team for each client to provide not only portfolio management but wealth coordination and financial planning.  We make every effort to have frequent communication with our clients and to provide timely response to calls and emails.  I also enjoy spending time with my wife and three kids, playing and following basketball, playing golf, and participating as an advisory board member for Breakthrough Urban Ministries.

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Top Ten Tax Tips from the "Top Ten" Lists

Exemptions and credits you might not know about

You can tell it’s tax season by the “Top Ten Tax Lists” that seem to be published everywhere including cocktail napkins. To save you time – and we all know that time equals money – we’ve picked the Top Ten Tips from a range of lists provided by the government, professional associations, advocacy groups and tax preparers. So, with apologies to David Letterman, here are the Top Ten things to remember when preparing your 2010 Tax Returns:
• The IRS reminds parents of ten tax benefits available to them. They include exemptions for dependents, and credits for child tax, child and dependent care, earned income tax, adoption and higher education. The American Opportunity and Lifetime Learning Credit are education credits that can reduce federal tax dollar-for-dollar, unlike a deduction, which reduces your taxable income. For more information see IRS Publication, 970, Tax Benefits for Education. The publication will also explain how you may be able to deduct interest paid on a qualified student loan.
• In its Top Ten Tax Time Tips, the IRS urges you to join the 99 million taxpayers who use its e-file system. The agency promises you’ll get your refund in as few as 10 days if you use e-file combined with direct deposit to your bank account.
• The AICPA advises you to claim the Saver’s Credit available to lower-income taxpayers who contribute to employer-sponsored retirement plans, such as an IRA, or an individual retirement vehicle, such as a Roth IRA. Taxpayers get a credit for up to half of what they contribute to a maximum of $1,000 per individual or $2,000 for couples. The American Institute of Certified Public Accountants also advices investors to top off their retirement accounts to boost tax-efficient savings.
• AARP, an advocacy group for retirees and people nearing retirement, reminds us that there is an additional standard deduction available for older taxpayers who do not itemize their deductions. An additional standard deduction of $1,100 for joint filers and $1,400 for single can apply for people 65 and older who choose not to itemize. There is no corresponding additional deduction for those who do itemize.
• New rules allow taxpayers who are 70.5 years old to make contributions to charitable organizations directly from IRAs without paying tax on the amount contributed from the IRA, the AICPA tells us. Contributions for 2010 can be made until the due date of the 2010 return, which is April 18 for most taxpayers filing federal tax returns.
• AARP doesn’t want us to forget that we can use our losses in the stock market to lower our taxes. Taxpayers can use capital losses up to $3,000 to offset other ordinary income. If net losses exceed $3,000 the excess can be carried over to 2011.
• Homeowners who installed certain energy-efficient heating and air-conditioning systems, water heaters, doors and windows, insulation and roofs are eligible to receive a credit to help reduce the costs, the AICPA said. Taxpayers who did not take advantage of the credit in 2010 have the chance to do so in 2011, under the new tax law. The credit is available for homeowners who invest in green energy equipment, too, such as solar electric systems and solar hot water heaters.
• Taxpayers can choose to take an itemized deduction for state and local general sales taxes on their 2010 taxes instead of the itemized deduction for state and local income tax, the AICPA said. This provision might mean a lower tax bill for taxpayers who have made a major purchase, such as a car, and live in states that have no income tax. The new law extends this option through 2011.
• Taxpayers who inherited property in 2010, when no estate tax applied, have nine months under the new tax law to choose the best way to file, the AICPA said. They can use the new estate tax rule, which exempts up to $5 million and applies a top rate of 35 percent to the remainder. They may also choose to pay no estate tax, but will be subject to the “carryover basis” rule. This typically results in a carryover of the owner’s original purchase price to the beneficiary to establish the cost-basis of the asset. Historically, the basis is stepped up to the fair market value of the asset at the time of the owner’s death.
• Section 529 College Savings Plans gives parents, grandparents and others a way to contribute after-tax dollars in order to have earnings and interest accumulate free of federal, and in some cases state taxes, the AICPA notes. No federal income taxes are paid on withdrawals from the accounts.
• Okay, we promised ten tips, but we’ve got one more. This is the 11th tip to help with the approach of the 11th hour. To quote tip number ten from the IRS, “Don’t panic!”