Where Personal Attention Will Never Become Obsolete! Year-End Tax Planning Seminar Presented By: Walter Deyhle, CPA, CFP 12/07/10

Year-End Tax Planning Seminar Tonight’s Agenda GRF Process Looking Ahead to 2011 Estate & Gift Tax Roth IRA Energy Savings Health Care Law Deficit Reduction Commission Report Questions 2

Year-End Tax Planning Seminar GRF’s Process E-filing CD copies Portal 3

Year-End Tax Planning Seminar

Year-End Tax Planning Seminar Rates for the “Rich”: What Could Have Been Rich is: $250,000 MFJ $200,000 Single 35% to 39.5% 33% to 36% Capital gains – 20% Qualified dividend taxes like ordinary income 5

Year-End Tax Planning Seminar 2011 & 2012: What May Be President Obama & GOP deal Current tax rates stay in effect for 2011 & 2012 –35% top tax rate –Capital gains & qualified dividends taxed at maximum of 15% 6

Year-End Tax Planning Seminar 2011 & 2012: What May Be (cont’d) –Reduced SS tax rate from 6.2% to 4.2% for 2011 –Full expensing of capital investments –AMT Patch for 2011 &

Year-End Tax Planning Seminar Estate & Gift Tax 8

Year-End Tax Planning Seminar Estate Tax Basics Unified gift & tax system No estate tax for taxpayers dying in 2010 Annual gifting of $13,000 Exclusion for education and medical payments 9

Year-End Tax Planning Seminar Estate Tax Basics (cont’d) Gift tax for gifts exceeding $1 M With no change in law: 2011 – estate tax bracket for estates > $1M Top tax rate of 45% –President Obama and GOP Deal 2011 & 2012 – Estate tax for estates>$5M Top tax rate of 35% 10

Year-End Tax Planning Seminar 11 Roth IRA

Year-End Tax Planning Seminar Convert to a ROTH IRA? 12 TRADITIONALROTH Tax deductible No tax deduction Qualified distributions taxableQualified distributions tax free Tax deferred growthTax free growth Required minimum distributionNo required minimum distribution Most effective when tax rate lower at retirement Most effective when tax rate higher at retirement

Year-End Tax Planning Seminar When To Convert Do not need IRA to pay tax Expect to be in a higher tax bracket in retirement Do not need IRA in retirement Expect to pay estate taxes 13

Year-End Tax Planning Seminar When To Convert (cont’d) No required minimum distributions Pass to heirs Heirs have required RMD If conversion occurs in 2010, an election can be made to report 50% of the income in 2011 and 50% in

Year-End Tax Planning Seminar Residential Energy Credit 15

Year-End Tax Planning Seminar Residential Energy Credit Removes individual item caps Increases limit to $1,500 Increases from 10% to 30% Prior $500 not counted For 2009 & 2010 installations Required energy efficiency increase 16

Year-End Tax Planning Seminar Health Care Law 17

Year-End Tax Planning Seminar Health Care Law 0.9% increase in Medicare tax after 12/31/12 –$200,000/$250, % increase in tax on investment income after 12/31/12 –$200,000/$250,000 18

Year-End Tax Planning Seminar 19 Deficit Reduction Commission Report

Year-End Tax Planning Seminar Report: Tax Reform Lower rates, broaden the bases, and cut spending in tax code Cut rates across the board, and reduce the top rate to between 23 and 29 percent 20

Year-End Tax Planning Seminar Report: Tax Reform 21 Simplify key provisions while increasing or maintaining progressivity Support for low-income workers and families Mortgage interest only principal residences Employer-provided health insurance Charitable giving Retirement savings and pensions

Year-End Tax Planning Seminar 22 Current LawIllustrative Proposal (Fully Phased In) Tax rates for Individuals In 2010, six brackets: 10%|15%|25%|28%|33%|35% Three brackets: 12%|22%|28% Alternative Minimum Tax Scheduled to hit middle-income individuals but “patched” annually Permanently repealed

Year-End Tax Planning Seminar 23 Current LawIllustrative Proposal (Fully Phased In) EITC and Child Tax Credit Partially refundable child tax credit of $1000 per child. Refundable EITC of between $457 and $5,666 Maintain current law or an equivalent alternative Standard Deduction and Exemptions Standard deduction of $5,700 ($11,400 for couple) for non- itemizers; personal and dependent exemptions of $3,650 Maintain current law; itemized deductions eliminated, so all individuals take standard deductions

Year-End Tax Planning Seminar 24 Current LawIllustrative Proposal (Fully Phased In) Capital Gains and Dividends In 2010, top rate of 15% for capital gains and dividends. All capital gains and dividends taxed at ordinary income rates 1 1 An alternative could be to exclude a portion of capital gains and dividends from income (e.g. 20%), reducing the effective top rate on investment income. To offset this while maintaining progressivity in the code, the top rate on ordinary income would need to be increased.

Year-End Tax Planning Seminar 25 Current LawIllustrative Proposal (Fully Phased In) Mortgage Interest Deductible for itemizers; Mortgage capped at $1 million for principal and second residences, plus an additional $100,000 for home equity 12% non-refundable tax credit available to all taxpayers; Mortgage capped at $500,000; No credit for interest from second residence and equity Employer Provided Health Care Insurance Excluded from income. 40% excise tax on high cost plans (generally $27,500 for families) begins in 2018; threshold indexed to inflation Exclusion capped at 75th percentile of premium levels in 2014, with cap frozen in nominal terms through 2018 and phased out by 2038; Excise tax reduced to 12%

Year-End Tax Planning Seminar 26 Current LawIllustrative Proposal (Fully Phased In) Charitable Giving Deductible for itemizers12% non-refundable tax credit available to all taxpayers; available above 2% of Adjusted Gross Income (AGI) floor State and Municipal Bonds Interest exempt from income Interest taxable as income for newly-issued bonds

Year-End Tax Planning Seminar 27 Current LawIllustrative Proposal (Fully Phased In) RetirementMultiple retirement account options with different contribution limits; saver’s credit of up to $1,000 Consolidate retirement accounts; cap tax-preferred contributions to lower of $20,000 or 20% of income, expand saver’s credit Other Tax Expenditures Over 150 additional tax expenditures Nearly all other income tax expenditures are eliminated 1 1 Under this plan, a few tax expenditures remain, for instance no changes are made to the tax treatment of employer pensions and tax provisions under PPACA largely remain in place. Note that the payroll tax base would remain the same as under current law, though there will be secondary revenue effects on the payroll tax side.

Year-End Tax Planning Seminar Report: Social Security Make retirement benefit formula more progressive 28

Year-End Tax Planning Seminar Gradually increase early and full retirement age, based on increase to life expectancy Increasing the Normal Retirement Age (NRA) to 68 by about 2050 Increasing the NRA to 69 by about 2075 Increasing the Early Eligibility Age to 63 and 64 in lock step 29 Report: Social Security

Year-End Tax Planning Seminar Report: Social Security Gradually increase the taxable maximum to cover 90 percent of wages by

Year-End Tax Planning Seminar 4550 Montgomery Avenue, Suite 650 N Bethesda, MD Where Personal Attention Will Never Become Obsolete! Questions? 31