This is a great illustration, and I would even argue the BEST illustration–brought to my attention by my good friend, JohnnyB–of what’s wrong with the current Health Care System, how it got there, and who’s actually (shockingly enough) coming up with the most radical (and arguably the most logical) approaches to solving said system. My favorite excerpt:

…[E]verything people dislike about our system results from the tax break for employer coverage. It makes costs rise, since people are less careful when they’re not paying out of pocket. It means people often lose their insurance when they switch jobs. And it keeps a lot of people–those who don’t have employers who provide coverage–from having much access to health insurance.

It’s always amazing to me how so many want us to learn from our past and figure out the “how did we get here” when discussing public policy…except for Health Care for some reason. In the case of a flawed public (tax) policy towards Health Care, many instead want to look outward and say: “Hey everyone else is doing it this other way.”

It’s really very simple: We do not have a true market-driven system if the end-user, the consumer, is not involved in the decision-making process. As soon as we give that a try, we’ll see if an ACTUAL market-driven system works.

The lesson to take from this? Everyone needs to figure out a way to write off their individual Health Insurance. Start a business, somehow, sell Amway if you have to, start a non-profit, whatever it takes, but don’t depend on your employer for your Health Insurance, and don’t let 60-year-old tragically flawed tax policies keep you from managing your own health costs and risks.

AND DO THIS WHILE YOU’RE HEALTHY, so that you NEVER have to make a job decision based on benefits.

If you have questions about taxes, call Earl, if it’s the Health Insurance you’re looking for, well you know by now who to call.

Zero capital gains rate coming in 2008

You already know the federal tax rate on capital gains varies, depending on your tax bracket, the kind of property you sell, and how long you owned it.

But are you aware that starting next year some capital gains won’t be taxed at all?

From 2008 through 2010, if your taxable income falls within the 10% or 15% tax brackets, the rate you’ll pay on your federal return for certain dividends and long-term capital gains will be zero.

The zero rate generally applies to gains on sales of assets such as stocks, bonds, and mutual funds that you owned longer than a year. Qualified dividends, which include dividends on most US stocks, are also eligible.

Note: Gains on sales of assets you owned for twelve months or less are still taxed at your ordinary income rate. Depreciation recapture and sales of collectibles remain subject to higher rates as well.

Though the zero percent break becomes effective January 1, you can start planning now. For instance, it may be beneficial to wait until 2008 to sell appreciated stocks in taxable investment accounts.

In addition, since expanded kiddie tax rules go into effect in January, it’s a good idea to review gifting plans before year end. Why? The new rules mean the investment income of your age 19 and younger dependent children (under age 24 for students) might be taxed at your rate in 2008. Preparing in advance can save tax dollars.

Other planning opportunities exist. Please contact us for more information.

contact: info@accountingassociatesva.com

How to determine the amount of a casualty loss deduction

Fire, flood, tornado. Violent weather can wreak emotional and financial havoc. If your home, vehicle or other personal property is damaged or destroyed by a sudden, unexpected casualty, an itemized tax deduction may help ease the financial burden.

In most cases, you claim a casualty loss in the taxable year the calamity strikes. However, if you’re in a presidentially declared disaster area, you have the option of amending your prior year return, thereby getting tax relief sooner.

Either way, to receive the maximum benefit you’ll need to calculate the amount of your loss. Here’s how.

1. File an insurance claim. If your property is insured, file a timely claim. Otherwise, you’ll only be able to take a deduction for the part of the loss that isn’t covered by insurance.
2. Get an appraisal. An appraisal determines the decline in fair market value caused by the casualty. Tax rules require that you measure the difference between what your home or property would have sold for before the damage and the probable sales price afterward. Your loss is the lesser of this decline or your adjusted basis in the property.
3. Establish basis. Generally, your home’s adjusted basis is what you paid for it, plus improvements. If your records were lost in the casualty, recreate them using reasonable estimates or the best information you have.
4. Keep receipts for repairs. In some situations, repairs you make to restore your property to its pre-casualty condition can be used as an indicator of the decline in the fair market value.

The aftermath of a casualty is often a stressful time. We’re here to help you resolve the tax issues. Please give us a call.

contact: info@accountingassociatesva.com

Check the link below on how to properly prepare yourself in case your return is chosen for a random audit.
Weekly Tax Tip