1. INCOME TAX
SAVINGS FOR
INDIVIDUALS
Kimberly A. Lawrence, CPA

2. INCOME
 Consider investments that generate tax exempt income
and income with favorable tax rates such as stocks and
bonds.
 Consider offsetting capital gains by selling investments
that are doing poorly.
 Review pension and annuity income, IRA distributions
and Social Security benefits as income, for the portion if
any is exempt from taxation.

3. ADJUSTMENTS TO GROSS INCOME
 Penalties on early withdrawal of savings accounts
 Alimony paid
 Retirement savings
 Self employment tax

4. ITEMIZE DEDUCTIONS &
EXEMPTIONS
 Consider itemizing your deductions instead of
taking the standard deduction.
 Standard Deduction
 Single $5,600
 MFJ $11,600
 Personal Exemption $3,700

5. MEDICAL EXPENSES
 Medical and dental expenses are deductible to the
extent they exceed 7.5% of your adjusted gross income.
 Medical expenses include
 Unreimbursed payments for doctors visits, exams
and treatment, dental visits, eye exams, prescription
eyeglasses and contacts, medicine, ambulance
services, lab fees, x-ray services, surgery or hospital
care, hearing aids, crutches, canes, orthopedic
shoes, etc.

6. MEDICAL EXPENSES CONT.
 Amounts paid as voluntary premiums under Part B of
Medicare (supplementary medical insurance benefits for
the aged and disabled) are deductible as medical care,
as are voluntary premiums under Medicare Part A (basic
Medicare)
 Medical transportation costs can be deducted at 16.5
cents per mile driven for each medical visit.
 Parking fees, public transportation, tolls, airfare and up
to $50 per night for lodging are allowable expenses.

7. MEDICAL EXPENSES CONT.
 Qualified long-term care insurance premiums are
deductible as medical expenses, but are subject to age
limitations.
 To qualify for the deduction, the long-term care policy
 must provide coverage only for qualified long-
term care services
 be guaranteed renewable
 have no cash value
 use refunds or dividends only to reduce future
benefits

8. MEDICAL EXPENSES CONT.
 The long-term care premium annual limits for an
individual whose attained age before the close of the tax
year are:
 40 or less, the limit is $340
 more than 40, but not more than 50, the limit is $640
 more than 50, but not more than 60, the limit is
$1,270
 more than 60, but not more than 70, the limit is
$3,390
 more than 70, the limit is $44,240

9. STATE AND LOCAL TAXES
 Deductible taxes include local and state income taxes,
personal property taxes, and real estate taxes. Pay real
estate taxes, mortgage interest, and state taxes that are
due after the end of the year in December so they can
be deducted in the current year.
 The election for taxpayers (on Schedule A of Form 1040)
to deduct state and local general sales and use taxes,
instead of state and local income taxes, has been
extended for two years so that it applies for tax years
beginning before 2012.

10. CHARITABLE CONTRIBUTIONS
 Charitable Contributions
 Charitable Miles – 14 cents/mile
 Always get a receipt
 Donations of cash, clothing, furniture,
household goods, and vehicles
 Mileage and other expenses associated with
volunteer work is also tax deductible.

11. MISCELLANEOUS ITEMIZED
 2% Miscellaneous Deductions
 Tax preparation software and fees,
 Investment fees and expenses
 IRA custodial fees
 Safe deposit box
 Legal fees for producing taxable income
 Trust administration fees

12. OTHER TIPS – ESTIMATED PAYMENTS
 Plan ahead!
 If your income is more than you expected,
consider paying estimates.
 Consider using the annualization method
when computing underpayment of estimated
tax penalties.
 Don’t forget to consider early withdrawal
penalties and AMT considerations when
planning and making estimated payments.

13. FILING
 Filing your return on time will help expedite processing of
your return and allow you to get a refund earlier.
 Recommend filing certified return receipt
 If you use a tax preparer you will likely be required to file
electronically unless you send a signed statement opting
out.

14. 2011 TAX RATES
Single Married Filing Jointly
Income Range Tax Of the amount Income Range Tax Of the
over amount over
$0 - $8,500 10% 0 $0 - $17,000 10% 0
$8,501 – 34,500 850 + 15% 8,500 $17,001 – 1,700. + 15% 17,000
69,000
$34,501 – 83,600 4,,750 + 25% 34,500 $69,001 – 9,500. + 25% 69,000
$83,601 – 17,025 + 28% 83,600 139,350
174,400 $139,351 – 27,087.50 + 139,350
$174,401 – 42,449 + 33% 174,400 212,300 28%
379,150 $212,301 – 47.513.50 + 212,301
379,151 and over 110,016.50 + 379,150 379,150 33%
35% 379,150 and 102,574 + 379,150
over 35%

15. RECORDKEEPING TIPS
 Records that can support a deduction or could
impact your federal return should be kept a
minimum of 3 ye
 ars
 Records regarding large purchases including
homes, cars, stocks, etc. and business or rental
property records should be kept longer
 Keep copies of your tax returns and tax form
packages

16. TENNESSEE HALL INCOME TAX
 Tax rate 6%
 Taxes certain interest and dividends
 Nontaxable income include
 Interest from bank and money market accounts
 Dividends from a publicly traded REIT
 Interest earned on bonds from Tennessee
 Bonds of US Government
 Interest from certificates of deposit

17. GIFTING
 Giving up to $13,000 to individuals or trusts per year tax-
free to each person you choose will reduce your estate
value
 Direct payments for tuition and medical expenses is not
a reportable gift
 Lifetime gift tax exclusion is $5,000,000 in 2011 and
2012 for federal purpose. This is not recognized by
Tennessee

18. 2013 PROVISIONS
 Unearned Income Medicare Contribution
 3.8% surtax is imposed on net investment income
 Interest, dividends, royalties, rents, capital gains,
passive income from a trade or business or income
from the business of trading in commodities or
financial instruments
 Excluded items:
 Interest on tax-exempt bonds, veteran’s benefits,
gain on the sale of a principal residence, trade or
business income and retirement plan distributions

19. 2013 PROVISIONS
Unearned Income Medicare Contribution Cont.
 The tax is imposed on the lesser of:
 Net investment income, or
 The excess of Modified Adjusted Gross Income over
$250,000 joint ($200,000 single)

20. ROTH IRA
CONVERSION
Kimberly A. Lawrence, CPA

21. ADVANTAGES:
 Conversion -
 Rollovers are not subject to the 10% early distribution
tax.

22. ADVANTAGES CONTINUED:
 Rollovers and transfers to a Roth account can be made
from any qualified retirement account including 401(k)
and 403(b) plans.
 Appreciation is tax-free.
 Net operating losses can offset Roth income

23. CONTRIBUTIONS -
 Can make contributions after age 70 ½ if the taxpayer
has compensation and meets AGI limits
 Retired couple could contribute $12,000 each year
(including the “over-50 make-up” amount) into Roth
accounts.
 Can make nondeductible contributions to a traditional
IRA and convert to a Roth regardless of AGI. The
account could grow tax free indefinitely.

24. DISTRIBUTIONS
 Tax-free distributions are especially beneficial if your tax
rate will be higher when you retire.
 No required distributions at age 70 ½.
 Distributions are not included in calculating modified
adjusted gross income for taxability of social security
benefits.
 Contributions may be withdrawn any time without tax or
penalty.
 If the taxpayer is at least 59 ½ and has held the Roth
account for at least five years, the earnings may be
withdrawn tax and penalty-free.

25. DISADVANTAGES:
 Contributions to Roth IRAs are never deductible for
income tax purposes.
 Income tax rates could be higher in years of conversions
and contributions than in years of distributions.
 Tax law changes could remove tax-free treatment on
earnings.

26. DISADVANTAGES CONTINUED:
 Ordinary income tax on the amount rolled over from a
traditional IRA to a Roth IRA.
 If have nondeductible and deductible IRAs, cannot
choose to roll over only the nondeductible amounts. The
amounts must be prorated based on the balances of
each type.
 A 6% excise tax applies if an individual exceeds the
aggregate regular Roth contribution limits.

27. QUESTIONS OR COMMENTS?