A friendly "Thank you!" for your patronage
during the past year and for the confidence you have placed in us.
We will always do everything we can to assure complete satisfaction.
We are looking forward to many more opportunities of serving you
in the future.
Our best wishes to you and your family for a happy
and healthy holiday season.
TOPICS COVERED IN
THIS ISSUE:
Lower your tax liabilities for
2006
Social Security befits to rise
Real estate tax credit in Massachusetts
What will you do when you retire?
Sales tax exemption for disabled
veterans
A real tax benefit
IT'S NOT TOO
LATE TO LOWER YOUR TAX LIABILITIES FOR 2006
You may think that this tax year is nearly over,
and there's little you can do about it now. However, taking a look
at your finances and doing a little tax planning now can pay dividends
next April 15, as well as down the road. There are still many things
the average person can do that can affect this year's taxes. This
may also be the time to make strategic moves for next year, such
as taking advantage of the favorable tax treatment of retirement
plans and employee benefit plans. Moving income or expenses either
forward or backward may offer substantial tax deferrals or additional
tax savings.
For more information about year-end tax planning,
call our office.
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Social
Security, SSI Benefits to Rise by 3.3%
Social Security
and Supplemental Security Income (SSI) benefits will increase by
3.3 percent in 2007, according to the Social Security Administration
(SSA). The rates for Old-Age, Survivors and Disability Insurance
(OASDI) and Medicare Hospital Insurance (HI) taxes will remain
unchanged at a combined 7.65 percent in 2007, but the maximum taxable
earnings for OASDI purposes will rise from $94,200 to $97,500.
The SSA increases are based on the
rise in the Consumer Price Index for Urban Wage Earners and Clerical
Workers (CPI-W) for the third quarter of 2005 through the third
quarter of 2006. For Social Security beneficiaries, the average
monthly benefit amount for all retired workers will rise from $1,011
to $1,044, and the maximum monthly benefit will increase from $2,053
to $2,116. The monthly SSI federal payment standard for an individual
will rise from $603 to $623; for a couple, the payment will increase
from $904 to $934.
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Annual
Update of Real Estate Tax Credit for Certain Persons Age 65 and
Older
1. Introduction
For tax years beginning on or
after January 1, 2001, an owner or renter of a principal residence
located in Massachusetts who is age 65 or older at the close of
the taxable year may be eligible to claim a refundable credit against
personal income taxes. Known as the "circuit breaker credit," this
credit is based upon the actual real estate taxes or rent paid
by a taxpayer eligible to claim the credit.
2. Income Threshold Amounts for Renters and Homeowners
A Massachusetts taxpayer age 65 or older that owns
or rents his or her principal residence is eligible for the circuit
breaker credit if he or she meets certain requirements. For purposes
of calculating the circuit breaker credit, total income and maximum
credit thresholds are adjusted annually to reflect inflation for
the calendar year in which the taxable year begins. For tax year
2006, the taxpayer's "total
income" cannot exceed $46,000 for a single individual who is
not the head of a household, $58,000 for a head of household, and
$70,000 for a husband and wife filing a joint return.
3. Income Threshold Amounts for Renters and Homeowners
A Massachusetts taxpayer age 65 or older that owns
or rents his or her principal residence is eligible for the circuit
breaker credit if he or she meets certain requirements. For purposes
of calculating the circuit breaker credit, total income and maximum
credit thresholds are adjusted annually to reflect inflation for
the calendar year in which the taxable year begins. For tax year
2006, the taxpayer's "total
income" cannot exceed $46,000 for a single individual who is
not the head of a household, $58,000 for a head of household, and
$70,000 for a husband and wife filing a joint return.
Calculation of the Credit
A. Renters The credit
is equal to the amount by which 25% of the rent actually paid by
the taxpayer during the taxable year for the occupancy of the principal
residence exceeds 10% of the taxpayer's total income for the taxable
year, provided that such amount does not exceed the maximum credit
amount. For tax year 2006, the maximum credit amount is $870.
B.
Homeowners The credit is equal to the amount by which the taxpayer's
property tax payments in the current tax year, including water and
sewer use charges paid to a municipality, but excluding any abatement
or exemption granted, exceeds 10% of the taxpayer's total income,
for the taxable year, provided that such amount does not exceed the
maximum credit amount. For tax year 2006, the maximum credit amount
is $870.
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Roger A. Kahan is a Certified Public Accountant,
a Tax, Business and Financial Advisor serving the tax and financial
needs of individuals and small to medium sized businesses primarily
in eastern Massachusetts (as well as almost anywhere in the United
States). Roger is always seeking additional clients and other
professional’s clients to advise and improve their personal or
business life. Do you know of someone that could use our professional
services? Please let us know if we can use your name in an introductory
letter or phone call. We do offer a referral fee to those that
join our ever-increasing list of tax clients. Call for more details.
Thank you.
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What Will
You Do When You Retire?
Thinking ahead will help you lead an interesting and rewarding life
after retirement. For most people, the key to a happy and fulfilling
retirement is simple: staying busy. Unfortunately, when planning
for retirement, a lot of folks focus only on finances, and fail to
think about, or plan for, how they will spend their time.
Why worry about retirement activities now, when retirement is years,
or even decades, away? Because, put bluntly, people who count on
developing new interests and involvements after 65 often do not.
And that makes for a bored, depressed old age.
Start Planning Now - It's never too early to plan
for what you will do in your golden years. To start, take a few minutes
to write down the things you expect to be actively involved in. Don't
count solo activities such as reading, watching TV, or jogging. While
fine in themselves, they are not likely to keep you energized and
interested for long. Be as specific as you can. For example, if you
plan to participate in charitable activities aimed at helping educate
Third World children, who will you work with and what will you do?
Keep in mind that participating in just a few activities
may not keep you interested in life and interesting to others. So
if your list consists of travel, adult education courses and golf,
you may need to do more planning. Here are some other activities
to consider -- and how to plan for them:
Working Part-Time - Many people who enjoy the hustle
bustle and creativity of the workplace find that working at least
part-time after retirement age offers the best opportunity to stay
busily involved in life. And, of course, working a few extra years
can go a long way toward helping solve money problems.
If you hope to establish a new career, turn a hobby
into a business or find a part-time job more challenging than flipping
burgers, it's important to plan ahead. Investigate whether you'll
need more education, experience or skills in order to execute your
plans. Then, take the time before you retire to develop the tools
you'll need. For example, if you'd like to convert your passion for
gardening into a landscaping business, you may need to take courses
in marketing and accounting, learn how and where to buy wholesale
plants and begin developing a customer base. This may mean cutting
back on current work and making some short-term financial sacrifices.
This commentary is brought to you by your friendly
neighborhood CPA.
The Massachusetts
Society of CPAs represents over 8,800 Certified Public Accountants
working in public accounting, industry and business, or in government
and education.
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Sales
Tax Exemption for Disabled Veterans Purchasing Motor Vehicles
Recent legislation creates a new sales tax exemption for certain
disabled veterans purchasing motor vehicles on or after November
1, 2006. As amended, G.L. c. 64H, § 6(u) will exempt the "sale
of a motor vehicle purchased by and for the use of a person who has
suffered loss, or permanent loss of use of, both legs or both arms
or one leg and one arm or by and for the use of a veteran who has
been determined to be permanently disabled by the medical advisory
board established under section 8C of chapter 90 and has been issued
a disabled veteran number plate under section 2 of chapter 90. This
exemption shall apply to one motor vehicle only owned and registered
for the personal, noncommercial use of such person."
Generally, Disabled Veterans' plates are issued
for "pleasure passenger vehicles owned by veterans who, according
to the records of the United States Veterans' Administration [now
called the United States Department of Veterans Affairs], by reason
of service in the armed forces of the United States have suffered
loss or permanent loss of use of one or both feet; or loss or permanent
loss of use of one or both hands; or permanent impairment of vision
of both eyes of the following status: central visual acuity of 20/200
or less in the better eye, with corrective glasses, or central visual
acuity of more than 20/200 if there is a field defect in which the
peripheral field has contracted to such an extent that the widest
diameter of visual field subtends an angular distance no greater
than twenty degrees in the better eye, or any other disability or
handicap of such veterans which may be determined by the medical
advisory board as established by section eight C." Further
information on applying for Disabled Veterans' plates along with
a list of other qualifying medical conditions is available on the
Registry of Motor Vehicles website at www.mass.gov/rmv/veteran/disvet.htm.
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A
REAL TAX BENEFIT
If the home tax deductions do provide you with an income
tax refund, you should consider adjusting your income tax withholding
exemptions at work to allow you to bring more money home each pay
period through an increase in your net pay. That additional net
payroll can help you pay the mortgage each month. You can change
your payroll withholding exemptions by visiting your payroll or
your human resources department. If they can’t show you how to
do it, we can.
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