Tax Updates 2011

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TAX		Taxable	Income
TABLE	Tax Rate	Over	Up to	PERSONAL EXEMPTION:	$3,700
	10%	$-	$17,000
Married	15%	$17,001	$69,000	STANDARD DEDUCTIONS:
Filing	25%	$69,001	$139,350	Married Filing Joint	$11,600
Joint	28%	$139,351	$212,300	Single and Married Filing Separately	$5,800
	33%	$212.301	$379,150	Head of Household	$8,500
	35%	$379,151	no limit
	Tax Rate	Over	Up to	RETIREMENT PLAN CONTRIBUTIONS:
	10%	$-	$8,500
	15%	$8,501	$34,500	Traditional and Roth IRA Contribution	$5,000
Single	25%	$34,501	$83,600	Catch Up Contribution for Age 50 and Older	$1,000
	28%	$83,601	$174,400
	33%	$174,401	$379,150	Simple IRA	$11,500
	35%	$379,151	no limit	Catch Up Contribution for Age 50 and Older	$2,500
	Tax Rate	Over	Up to
	10%	$-	$12,150	SEP IRA	$49,000
	15%	$12,151	$46,250	(Maximum Compensation Considered)	$245,000
Head	25%	$46,251	$119,400
Of	28%	$119,401	$193,350	401K / 403(b) / Section 457 Plans	$16,500
Household	33%	$193,351	$379,150	Catch Up Contribution for Age 50 and Older	$5,500
	35%	$379,151	no limit



Health Savings Account Contribution Limits:
Single Coverage (minimum deductible-$1,200):	$3,050
Family Coverage (minimum deductible-$2,400):	$6,150

*HSA holders age 55 and older are allowed an additional $1,000 contribution.

Personal Exemption Phaseout:
Under current law, the personal exemption phaseout rules will not apply in 2011.

Itemized Deduction Phaseout:
Under current law, the itemized deduction phaseout rules will not apply in 2011.

Social Security Wage Base: $106,800
-Earnings cap to avoid reduced social security benefits before year full retirement age is met: $14,160 -Earnings cap to avoid reduced social security benefits in year full retirement age is met: $37,680

Earned Income Credit Information:
The Earned Income Credit applies to working taxpayers who's income falls below certain thresholds. The maximum Earned Income Credit available has been raised to $5,751. This is a refundable credit, so even if you have no taxable income, you may still qualify for this credit. The 2011 thresholds are as follows:
No Children - earnings and AGI must be less than $13,660 or $18,740 if married filing jointly.
One Child - earnings and AGI must be less than $36,052 or $41,132 if married filing jointly.
Two Children - earnings and AGI must be less than $40,964 or $46,044 if married filing jointly.
Three or More Children - earnings and AGI must be less than $43,998 or $49,078 if married filing jointly.
*Investment income may not exceed $3,150.
*Cannot be claimed when filing status is Married Filing Separately.

FEDERAL TAX UPDATES:

Landlord Requirement to Issue 1099's Repealed

Credit for Hiring Unemployed Vets

Mileage Deduction Rates

Convert Non Deductible IRA to Roth IRA Tax Free

Credit For Energy Efficient Home Improvements

New and Improved Education Credit

0% Capital Gains Tax Rate Extended Through 2012

The Making Work Pay Tax Credit Has Expired

Section 179 Depreciation and Bonus Depreciation

Foreclosure Relief

Capital Gain Exclusion on Vacation or Rental Property Conversions

Deduction for Private Mortgage Insurance

WISCONSIN TAX UPDATES:

$5,000 Subtraction for Certain Retirement Benefits

New Marginal Tax Bracket for High Incomers

Capital Gains Exclusion Reduced

FUTA Credit Reduction to Cost Wisconsin Employers

Health Savings Account Contributions No Longer Taxable

New Subtraction for Child and Dependent Care Expenses

Wisconsin Treatment of Health Insurance Benefits for Adult Children

2011 FEDERAL TAX UPDATES

Landlord Requirement to Issue 1099's Repealed: The requirement for landlords to issue 1099's to service providers has been repealed under the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011.

Credit for Hiring Unemployed Vets: A new tax credit will be available to businesses that hire unemployed veterans who begin employment after November 21st, 2011 and before January 1st, 2013. The credit will be 40% of the first $14,000 of pay for vets that have been jobless for at least six months. Alternatively, employers may be eligible for a 40% credit on the first $6,000 of wages for vets who've been out of work at least four weeks but less than six months. Larger credits will be available for disabled vets.

Mileage Deduction Rates:

Business Miles	51.0 cents per mile 1/01-6/30 and 55.5 cents per mile 7/01-12/31
Charitable Contribution:	14.0 cents per mile
Medical Travel & Moving	19 cents per mile

Convert Non Deductible IRA to Roth IRA Tax Free: Are you barred from contributing to a Roth IRA because your income is too high? There is another way to join the Roth party. You could make a Non Deductible IRA contribution and immediately convert to a Roth IRA, tax free, If however you have any other Traditional IRA's, SEP's, or Simple IRA's, only a portion of the conversion will be tax free. Please call our office for additional information concerning this tax strategy.

Credit for Energy Efficient Home Improvements: Please click here for additional information on qualifying property and credit limitations.

New and Improved Education Credit: The American Opportunity Tax Credit was set to expire, however it has now been extended through 2012. This credit is a modified Hope Credit. The maximum credit will be $2,500, of which up to 40% may be refundable. This credit can be claimed for students in their first four years of higher education. The income phase out limits for this new credit are significantly higher than under the old credit, making it available to higher income taxpayers.

0% Capital Gains Rate Extended Through 2012: Taxpayers who are below the 25% tax bracket will qualify for a 0% tax rate on qualified dividends and long term capital gains. If such dividends and gains push the taxpayer's income into the 25% marginal bracket, then only amounts in excess will be taxed at a 15% rate.

The Making Work Pay Tax Credit: The Making Work Pay Tax Credit has expired. In its place for 2011 is a reduction to the employee's share of social security tax that is being deducted from one's paycheck. The tax has been reduced from 6.2% to 4.2%. This tax savings will be seen on each paycheck similar to the Making Work Pay Tax Credit.

Section 179 Depreciation and Bonus Depreciation: The maximum Section 179 deduction has been increased from $250,000 to $500,000 for tax years 2010 and 2011. The total amount of qualifying property purchased in the year cannot exceed $2 million, or the deduction will be phased out dollar for dollar for amounts exceeding $2 million. As always, both used and new equipment can qualify for this deduction. The Bonus Depreciation rate for 2011 is 100%. Bonus Depreciation applies to the purchase of new qualifying assets only. Most assets with useful lives of 20 years or less will qualify for Bonus Depreciation.

Foreclosure Relief: For tax years 2007 - 2012, up to $2 million of debt forgiven on the foreclosure one's primary residence is eligible to be excluded from taxable income. The debt forgiven that is excluded from income will reduce the taxpayer's basis in the property. This could result in a capital gain if the Section 121 exclusion limits are exceeded ($250,000 for single filers and $500,000 for married filing joint).

Capital Gain Exclusion On Vacation and Rental Property Conversions: Under current tax laws, when a vacation or rental property is converted to a principal residence and later sold, a portion of the gain on sale may be subject to tax even if the taxpayer would otherwise qualify under the Section 121 Exclusion. The amount subject to tax is based on the fraction of time after 2008 that the property was used as a vacation or rental property over the total time the property has been owned by the taxpayer. For example, assume a taxpayer purchased a vacation home in the year 2001, converted the property to a principal residence in 2011, and sold the property in 2015. The percentage of gain subject to tax will be 13.3% (2/15). Under previous law, a taxpayer would have qualified for the full Section 121 Exclusion as long as he/she lived in the property for 2 of the last 5 years.

Deduction For Private Mortgage Insurance (PMI): The itemized deduction for PMI has been extended thru 2011. To qualify for the deduction, the purchase or refinance of a primary or 2nd residence giving rise to the PMI must have occurred after January 1st, 2007. The deduction is phased out for taxpayers with Adjusted Gross Income (AGI) exceeding $100,000. The deduction is reduced by 10% for every $1,000 above $100,000. The deduction is completely phased out when AGI exceeds $109,000.

2011 WISCONSIN TAX UPDATES

$5,000 Subtraction for Certain Retirement Benefits: Beginning in tax year 2009, up to $5,000 of retirement benefits from a qualified retirement plan or IRA may be subtracted when determining Wisconsin taxable income. To qualify for the subtraction, the following income limitations must be met:

-if your filing status is single, your federal adjusted gross income must be less than $15,000
-if your filing status is married joint, your federal adjusted gross income must be less than $30,000
-if your filing status is married filing separately, your combined adjusted gross incomes must be less than $30,000

New Marginal Tax Bracket for High Incomers: Effective January 1st, 2009, high incomers will be subject to a new marginal tax rate of 7.75%. Previously, the highest marginal rate was 6.75%.

Capital Gains Exclusion Reduced: Effective January 1st, 2009, the new capital gains exclusion percentage will be 30%. Previously, 60% of your qualifying capital gains could be excluded from your Wisconsin taxable income.

FUTA Credit Reduction to Cost Wisconsin Employers: Wisconsin employers will be subject to yet another tax increase. The employer paid effective FUTA tax rate will increase retroactively from .8% to 1.1% for the period January 1st to June 30th, 2011, and from .6% to .9% for the period July 1st to December 31st, 2011. This tax increase will be used to pay back loans from the federal government. The loans were used to keep Wisconsin's unemployment insurance program solvent. To add insult to injury, Wisconsin employer's are also being forced to cover the interest accruing on these loans. The Department of Workforce Development will bill this "tax" once per year to most Wisconsin employers.

Health Savings Account Contributions No Longer Taxable: Effective January 1st, 2011, Health Savings Account contributions are no longer subject to Wisconsin income tax. In past years contributions that were deductible for federal income tax purposes were required to be added back to Wisconsin taxable income on Schedule I.

New Subtraction for Child and Dependent Care Expenses: Beginning in 2011, Wisconsin will allow for a subtraction of dependent care expenses. The subtraction available in 2011 will be limited to $750 for one qualifying person and $1,500 for more than one qualifying person. The allowable subtraction will increase each year. In 2014 the subtraction will be fully phased in; $3,000 for one qualifying person and $6,000 if more than one.

Wisconsin Treatment of Health Insurance Benefits for Adult Children: Wisconsin has adopted the federal tax treatment relating to health insurance benefits for adult children under age 27. Thus, if the child is age 26 or less at the end of the tax year, the health insurance benefits may be excluded from the parent's income even if the child provides more than one-half of his or her own support, earns more income than the exemption amount, does not live with the parent, or if any other restriction applies which prevents the parent from claiming a dependency exemption. Although this legislation was signed November 4th, 2011, it will be retroactive to January 1st, 2011.