2007 Tips for Reducing Your Taxes

TIP 1 Manage Taxes on Social Security Benefits. Social Security benefits begin to be taxable when your income is between $25,000 and $34,000 for singles ($32,000 and $44,000 if married filing jointly). You even have to count half of your Social Security benefits and tax-exempt municipal bond interest as income in the Social Security tax calculation.

• Using the income ranges above, see if your income can be managed from year to year to minimize the taxation of your Social Security benefits.
• If your Social Security benefits will be taxed or you ended up with a tax surprise because they were taxed last filing season, ask the Social Security Administration to withhold taxes from your benefits checks.

TIP 2 Consider an HSA. A Health Savings Account is a tax favored account that can be established by individuals covered under High-Deductible Health Plans. Think of an HSA as another form of an IRA specifically set up to pay for medical expenses. The key advantages are:

• High-deductible health insurance plans have much lower premiums.
• Contributions to your HSA are tax deductible provided the high-deductible health insurance plan you choose meets federal guidelines.
• Earnings in your HSA account are tax free as long as the funds are used for qualified medical expenses.
• Unused contributions and earnings may be carried over year after year.
  The HSA Contribution Limits for 2007 are:

  HSA's - 2007 Deductible Contribution Limits
  Coverage	Contribution Limit
  Self-only	$2,850
  Family	$5,650

• Qualified High Deductible Plans must have 2007 deductibles of at least $1,100 for single coverage and $2,200 for families. Maximum annual out of pocket expense limits must be no more than $5,500 for singles and $11,000 for families.

TIP 3 Deduct Your Mortgage Insurance Premiums. The premiums you pay during 2007 may be deductible. The premiums must be in connection with new mortgage debt from a primary home purchase or a refinance of your principal residence in 2007. The amount you can deduct is reduced by 10% for every $1,000 ($500 if your filing status is married filing separately) by which your adjusted gross income exceeds $100,000 ($50,000 if your filing status is married filing separately).

2007 Spotlight on Credits Child Tax Credit (CTC)

The child tax credit allows those with children to receive a tax break. As with other tax laws, the qualifications can be complex.

How it Works

The maximum credit is $1,000 per qualifying child. The credit is reduced by $50 for each $1,000 of your Modified Adjusted Gross Income, over:

• $110,000 if married filing jointly
• $75,000 if single, head of household, or qualifying widow
• $55,000 if married filing separately

A qualifying child is a child who:

• is the taxpayer's son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (grandchild, niece, etc.).
• lived with the taxpayer for more than half the tax year.
• is under age 17 at the end of the year
• did not provide more than 1/2 of their own support during the year
• is a U.S. citizen, national or resident.

Common questions

Must the child be my dependent to qualify? Not necessarily. There are a few exceptions that could still qualify your child.
My tax is zero. Can I still get the credit? No, the CTC cannot create a refund below zero, but you could qualify for the "Additional Child Tax Credit" for any amount of the CTC that reduced your tax below zero. Income limits apply.
What if I'm divorced? Special rules apply depending on who claims the dependent, custodial rules, and support tests. Call to review your situation.

2007 Tips for Retirement Spending

Congrats to all clients who have begun their retirement years. With good health, family and friends, you are facing the most enjoyable years of your life.

The money you have saved for retirement may comprise a portfolio of tax advantaged accounts like Traditional IRA's, Roth IRA's, SEP IRA's 401(k)'s, 403(b)'s and/or taxable accounts such as savings accounts, CD's, stocks, bonds or other investments. When it comes to drawing down these retirement savings, consider the following general tips:

TIP 1Keep a balanced portfolio. To fund your retirement with your investment portfolio withdrawals, whether in taxable or tax deferred accounts, bring stock-bond-cash allocations back to preset, risk-diversified levels at least once a year.

TIP 2Draw down your taxable accounts first. It is usually best to keep tax-deferred savings growing as long as possible and tax-free accounts like Roth IRAs growing indefinitely. So first look to use interest earned on your taxable portfolio.

TIP 3 Sell long-term stock market winners first. It is better to pay the 15% capital-gains tax (5% for filers in the lowest brackets), than an ordinary income tax as high as 35%.

TIP 4 Sell bonds and use cash/CD savings. If you wish to retain your stock winners or you need additional income beyond interest earned on bonds and savings accounts consider using your liquid savings (cash, bonds, etc.).

TIP 5 The "4% Rule" of retirement spending. As a general "Rule of Thumb" some suggest you spend no more than 4% of your retirement savings annually to enable your savings to support you for as long as 30 years in retirement.

TIP 6 Pay attention to minimum withdrawal rules. After age 70 1/2, many tax deferred accounts require minimum withdrawals. Your tax bracket, health, and spending needs can easily alter your withdrawal strategy. Consider taking your "initial" withdrawal in the year you reach 70 1/2 versus the following year.

TIP 7 When to start Social Security. If you can afford it, consider delaying the start of your Social Security benefits. While you can start receiving benefits at age 62, the checks will increase each year you delay the start date until you reach age 70.

While everyone's situation is different, hopefully these tips can help you realize truly "golden" years in your retirement. If you have questions or would like to discuss your specific retirement spending situation feel free to call.

2007 It's Time to Check Your Withholdings

It is always a good idea to check your Federal and State income tax withholdings each year while there is still time to make adjustments if needed. Some common reasons to make adjustments are:

• You received a large tax refund last year.
• You were surprised and had to pay taxes when you filed your return.
• You've had a life changing event such as marriage, divorce, birth or adoption, new home or loss of an exemption.
• Your income changed due to a job change or retirement.
• Your deductions have changed because of expenses for education, medical care, interest and/or charitable giving.
• The tax laws changed.

TIP 1 How to Check? There are a variety of worksheets available online to see if you are having the right amount of tax withheld. One simple way is to ask your employer for a W-4 Form. This federal form provides several worksheets for your use to determine the proper withholdings for you. Better still, if you have a change noted above, call to have a withholding estimate done for you.

Hint: You'll find it is helpful to have a copy of last year's tax return and a recent pay stub when you complete the W-4 for comparison and projection purposes.

TIP 2 When to Check? The earlier you check the easier it will be to get the correct amount of tax withheld for the year.

If you have any questions about your withholdings for 2007, don't hesitate to call the office.