Military Officer - November 2008 - (Page 61)

2008 ﬁnancialguidebook addition, up to $3,000 in losses may be taken against ordinary income from other sources. Remember, the lower tax rate on qualiﬁed dividends and capital gains is due to expire in 2010, so take advantage of today’s low rates. Disabled retirees with backdated VA award letters can amend prior years’ returns. The 2008 Heroes Earnings Assistance and Relief Tax (HEART) Act has a very important provision for disabled retirees who receive a backdated VA disability award letter. Normally, a retiree only has three years to amend a prior year’s return if the VA increases a disability rating — essentially turning taxable retired pay already received into nontaxable disability pay. However, because it often takes the VA years to rule on some cases, many disabled veterans are unable to make claims for preceding years and end up losing money. The 2008 HEART Act, which was signed into law June 17, changes this dramatically: ■ spouse liquidated the stock and gave her the proceeds, you would owe $2,850 in capital gains taxes ($24,000-$5,000 x .15 = $2,850). Important note: If you give to children or grandchildren who are under the age of 19 or are full-time students under the age of 24, they will be subject to the provisions of the “kiddie tax,” which means much of the gain could get taxed at their parents’ tax rate. Are you close to the standard deduction when you itemize your taxes? If you have a “wellaged” mortgage and reasonable property taxes, you might be very close to the standard deduction limit of $10,900 for married ﬁlers ($5,450 for single ﬁlers and $8,000 for head-ofhousehold ﬁlers). Let’s assume you have mortgage interest deductions of $6,500, property taxes of $4,000, and charitable contributions of $1,000. This total of $11,500 puts you just a bit over the standard deduction (assuming you are married and ﬁling jointly). However, if you prepaid your property taxes in 2008, doubled your usual charitable contributions, and prepaid your January mortgage in December, your itemized deductions would jump to about $17,000, provid- ing a bigger write-off. In 2009, you would take the standard deduction (probably a bit more than $11,000) and repeat the “deduction bunching” for 2010 and 2011. Note: A great tool to use for charitable gifts is highly appreciated stock or mutual funds from taxable accounts. You receive a tax deduction for the full fair market value of the donated stock and avoid paying capital gains taxes (as does the charity you give to). Have you rebalanced your portfolio lately? With the stock market losing more than 20 percent of its October 2007 highs at press time, it might be a good time to make some adjustments in your portfolio. Consider selling some losing positions to protect any gains you have taken Disabled retirees who received a backdated VA disability award from Jan. 1, 2001, to June 17, 2008, have until June 17, 2009, to ﬁle a Form 1040X amended return to make adjustments for tax years 2001 through 2007. If they already have ﬁled an amended return for a previous year, they may only ﬁle for years not yet covered. Shifting appreciated investments to family members in a lower tax bracket can be a smart move. this year from taxes. With capital gains tax rates likely to rise substantially in the next two years, now might be a good time to sell if you have losses to offset the gains. In For example, suppose Maj. John Smith retired from the Army in 2002 with a 30-percent VA disability rating. Based on his health, he appealed this rating [CONTINUES ON PAGE 83] NOVEMBER 2008 IMAGES: PHILIP JAMES CORWIN/CORBIS; PREVIOUS SPREAD, SHUTTERSTOCK MILITARY OFFICER 61

Table of Contents Feed for the Digital Edition of Military Officer - November 2008

Military Officer - November 2008 Contents From the Editor From the President Your Views MOAA Directory Rapid Fire Washington Scene Chapters in Action Financial Forum Ask the Doctor Financial Guidebook Out of the Red 7 Year-End Tax Strategies Cover Story: Memory Survives Something to Say MOAA Scholarship Recipients Pages of History Faces of MOAA Information Exchange Member Books Advertising Index MOAA Member Services MOAA Calendar Sounding Taps Encore

Military Officer - November 2008

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