Phone: 651-298-1188
Fax: 651-228-1952

624 Grand Avenue
Saint Paul, MN 55105

JANUARY 2012

News for 2011

•    Stock sales during 2011 and 2012 still qualify for a 0% capital gain rate on the Federal return for some taxpayers, depending on your tax bracket.. That means that in some cases you would pay NO tax on your profit.

•    The current capital gain tax is capped at 15%. As of now, that rate will be in effect through 2012.

•    The provision that taxes dividends at capital gains rates was extended through 2012.

•    Energy credits are still avaiable for 2011 but they are limited to a maximum credit of $500. Within that overall limit there are limits on specific items. If you have taken energy credits for tax years 2006, 2007, 2009 and  2010 you may no longer be eligible. Windows, doors, insulation, some roofs may qualify.  Certain water heaters, air conditioners, and furnaces may also qualify.  A website – www.energystar.gov will have details about what qualifies.

•    For 2011 there is no longer a “Making Work Pay Credit”. Working taxpayers payments into social security were reduced by 2% instead.

•    Taxpayers who took the "First Time Homebuyer Credit" on their 2008 tax return will be making their second installment of the repayment on their 2011 tax return.

•    The expanded Education credits were extended for 2011.

•    Taxpayers over 701/2 were required to take a minimum distribution from their retirement plans in 2011.

•    Tax year 2010 presented taxpayers an opportunity to convert their current IRA to a Roth IRA. Taxpayers were offered the opportunity to pay the tax over two years. For those people who chose this option the first payment will be due on the 2011 tax return.

Former income limitations were lifted for conversions from traditional IRAs to Roths so going forward the option is available to all. 

•    For  2011 and 2012 contributions to an IRA are limited to $5,000. If you are age 50 and older you can contribute $6,000.

•    The limit on contributions to your 401K for  2011 was $16,500. Those 50 and older can contribute $22,000. For 2012 the limit is $17,000 and those 50 and older can contribute $22,500.

•    Minnesota reciprocity agreement with Wisconsin ended effective January 1, 2010. For Minnesota residents working in Wisconsin this means they will have to file a Wisconsin return as a nonresident as well as a Minnesota return. Wisconsin residents working in Minnesota will have to file a Minnesota return as a nonresident as well as a Wisconsin return.
 
Back in 1977 a tax act was passed. It was called the “The Tax Reduction and Simplification Act of 1977”. Since then numerous tax bills have passed. Though some tax reduction has happened (along with a lot of increases!) there has really been no simplification. Tax laws are more complex than they have ever been. We encourage you to seek professional help in order to sort through the maze. 

The Morality of Tax Savings

 “…Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor: and all do right, for nobody owes any public duty to pay more than the law demands; taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.” Judge Learned Hand