Estimated Large Distributions

This list is not inclusive, check your funds out! These are some of the largest funds used for example.

2. Use the best method, not the easiest in computing tax on mutual fund profits and stock sales (there are three ways), lump sum pension plan distributions, deductions for business equipment, and foreign taxes.

Other basic strategies to save on taxes is to shift income and deductions between two adjacent years, especially if your tax bracket will be higher in one of them.

How to shift income into next year or deductions into this year:

• If you expect a year-end bonus, ask your employer to pay it (and/or other salary) early next year. If you’re in a high bracket try to convert current income into deferred compensation, fringe benefits, or incentive stock options (ISOs).

• If you run your own business, delay income by sending this year’s bills next year.

• If you plan to marry someone with a roughly similar income, try to delay the marriage until 2001 if you’ll be taxed less on a joint return (marriage can put you into a higher bracket, and if your combined incomes exceed $128,950, you may lose some of your deductions). The opposite may hold if your incomes are very unequal.

• Bunch expenses such as itemized deductions and medical expenses into high-bracket year.

• Pay your winter property tax bill in December if this a high income year or wait and pay it in January if next year’s income will be higher.

• Contribute stock to your favorite charity - you get a tax deduction for the fair market value yet pay no tax on the capital gain.

• Clean out the house and contribute unneeded items to charity.

Make an itemized list and value each item, DO NOT use the per bag method of figuring your contributions.

• Avoid gift taxes by making gifts of up to $10,000 per person per year ($20,000 if your spouse joins in).

• Investment Losses - If you have unrealized losses on your investments now might be a good time to make them real. Note - you need to stay out of the investment for 30 days for the loss to be usable on your tax return. (See Mutual Fund idea). Sell the losers, keep the winners.

• Avoid shortcuts such as a simpler forms when longer forms may generate greater tax benefits. Also, avoid using fixed-rate allowances for business trip meals.

• Contribute as much as you can to retirement plans (IRAs, 401ks, 457, etc.). If you have net self-employment income, set up a Keogh, SEP, or SIMPLE.

• Review your receipts for deductible items, go over credit card statements, cancelled checks, and sales receipts.

• Time your state estimated fourth quarter payment due January 15, 2001. If 2000 tax year income high, make your payment early.

• Keep track of your charity mileage, tolls and parking if you drive for your church or charity. Deduction is 14 ¢ a mile.

• Maximize your new business equipment deduction of up to $20,000 for tax year 2000.

• Shift income to other family members who have a lower bracket, i.e. your children may be in a zero bracket vs. your 28%. The first $700 of a child’s investment income is tax free.
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• Sell real estate on the installment method if you have a large gain on the sale of investment land or real estate. This spreads the tax due out over a longer period of time reducing the chance that you are pushed into a higher tax bracket.
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• Swap Real Estate Investment property by using the Like-Kind Exchange provisions in the tax code.

New for 2000 - Michigan now has a Section 529 Educational Savings Plan. Contributions to this plan qualify for a maximum $5,000 tax deduction on your state return This deduction has no income limits.. These plans have many features and restrictions so carefully review the plan. NOTE - Maximum contributions to the Michigan 529 Plan is $50,000.

The new rates are 8% (15% tax bracket tax payer) and 18% for assets with a 5 year or longer holding period. Planning trap, the 8% rate goes into effect immediately, but the 18% rate only applies to assets purchased after January 1, 2001. NOTE - There is a special election one can make to have assets bought before January 1, 2001 to be covered under the 18% rate but the election needs to be made in 2001. Consult your advisor for more details.

Business mileage rate rises to 34.5 ¢ per mile.

Simple retirement account contributions increase to $6,500 from $6,000.

Projected 2001 tax rates are:

	Standard deductions: Single $4550
	Married Filing Joint $7600
	Married Filing Separate $3775
	Head of Household $6650
	Extra standard deductions for age 65 or older is projected to be; $1,100 single and $900 married.