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Happy New Year! | Tax Tip of the Week | No. 179 December 31, 2012

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Great News for 2013!

There is at least one much anticipated tax law change for 2013—the Ohio Estate Tax is gone!  (refer to TTW# 103 for more background on the Ohio estate tax). 

That’s right; you will no longer need to pay (or file a tax return) estate taxes to Ohio.  We can only hope that Congress will act and give us some guidance now on the federal estate tax rules. We look forward to offering you tips and updates throughout 2013 to help you navigate the never-ending tax law changes. 

Let us know if there are any topics you would like us to cover this year. 

As always, give us a call with any questions or concerns you may have.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Happy Holidays! | Tax Tip of the Week | No. 178 December 26, 2012

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We are Going to Take a Break From Tax Planning This Week

Instead, the family of Bradstreet & Company would like to wish you and your family the most joyous holiday season and best wishes for 2013. 

We hope you have enjoyed the Tax Tip of the Week this year.  Please let us know what topics you would like us to cover as we enter the New Year.

Is the Tax Tip of the Week real?

While your kids are questioning if Santa is real, we continue to receive some interesting feedback that some of you don’t realize this is really Bradstreet CPAs reaching out each week (… some suspect this is a “packaged” communication to which we add our logo).   Well, rest assured, it’s us and we’d love to hear from you.

Enjoy the week and, “Yes Virgina, there is a Santa Claus”.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Another Year-End Planning Consideration | Tax Tip of the Week | No. 177 December 19, 2012

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Time Running Out For Large Gifts

Currently, the exemptions for federal gift tax, estate tax, and generation-skipping transfer (GST) tax are at historic highs, and the gift, estate, and GST tax rates are at historic lows. But, in 2013, the exemptions are scheduled to substantially decrease, and the tax rates are scheduled to substantially increase. 

This raises the question of whether 2012 might be a good time to make large gifts that take advantage of the current large exemptions while they are still available.

Give us a call before it is too late.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Gamblers Must Pay Taxes on Winnings | Tax Tip of the Week | No. 176 December 12, 2012

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Don’t Bet On It!

With the growing number of Ohio casinos, we wanted to remind you that the IRS will be looking at your winnings!  The IRS (and the State of Ohio and cities too) considers gambling proceeds as taxable income. 

Gambling income includes winnings from lotteries, raffles, horse races and casinos. 

The payer of gambling winnings must issue you a W-2G if you receive: 

-$1,200 or more in gambling winnings from bingo or slot machines;

-$1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from Keno;

-More than $5,000 in winnings (reduced by the wager) from a poker tournament;

-$600 or more in gambling winnings (except for those games stated above) and the payout is at least 300 times the amount of the wager.   

Gambling income is reported as “Other Income” on the first page of your federal income tax return.  If you itemize your deductions, you can deduct your gambling losses on Schedule A.  You need to keep good documentation throughout the year to substantiate your gambling losses.  You can only claim a gambling loss deduction up to the amount of the gambling proceeds. 

While it is good news that you may be able to deduct gambling losses on the federal return, there is no place to deduct losses on your Ohio (or School District) tax return.  As we said, gambling winnings are reported on the front page of the federal return. It is the last number on the front page of the federal return that goes to Line 1 and begins your Ohio return.  

In addition, more and more Ohio municipalities are now defining gambling proceeds as taxable income.  Again, there is no place to deduct gambling losses on a city tax return.

Good luck as you try out the new casinos—just don’t bet on keeping it all! 

As always, give us a call with any questions you may have.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Is an Irrevocable Life Insurance Trust Right For You? | Tax Tip of the Week | No. 175 December 5, 2012

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An Estate Planning Tip

Most of us have some sort of life insurance, so that when we die, our loved ones will be able to use the proceeds to pay off our debts and provide for some of their future living expenses. One thing that is often overlooked is that life insurance proceeds can be subject to Federal estate taxes when we die. For 2012, the Federal estate tax rate is as high as 35%. For 2013, if there are no changes, that rate can be 55% and there will only be a one million dollar exclusion. 

You only pay estate tax on property that you own at your death. One way to avoid paying estate tax on life insurance proceeds is to have the policy owned by an Irrevocable Life Insurance Trust, or ILIT (say, “eye-lit”). 

What is an ILIT & how does it work?  

An ILIT is a type of trust that can be set up to hold life insurance policies. Instead of you owning a policy on your life, the ILIT owns it. Then, you name the ILIT as the beneficiary of your policy. Your family would be the beneficiaries of the ILIT and would receive the proceeds of your policy via the ILIT. During your lifetime, the policy premiums would be paid by the ILIT, after you had transferred the cash to a bank account owned by the ILIT. 

An ILIT is irrevocable, which means that once it is set up, you cannot change it. But that also means that any life insurance policies owned by the ILIT are not owned by you; therefore, you will not owe any estate tax on the proceeds

A properly drafted ILIT will allow your life insurance proceeds to flow to the beneficiaries you want, without being decreased by estate tax. Make sure that you have it set up by an experienced attorney. 

Maintaining an ILIT can be involved, as there are gift tax consequences as well as accounting and tax returns that will need to be addressed. You would name a Trustee (consider a professional), who would administer the trust and deal with these issues. 

While there will be costs involved with setting up and maintaining an ILIT, the potential estate tax savings should more that outweigh these administrative costs. 

If you think that an ILIT could be an option for you in your estate plan, give use a call to discuss in more detail.
As always, give us a call with any questions you may have.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.