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Capital gains tax
changes in 2011
increased federal income tax brackets, the capital gains tax rates will
also be changing (and not for the better). The top rate for long-term
capital gains will be rising from 15% to 20%, and the 0% rate for those
in the lowest tax brackets will be replaced by a 10% long-term capital
deduction increase 2011
deduction should increase from $5,700 to $5,800 for single filers and
from $11,400 to $11,600 for those married filing jointly.
of the estate tax for 2011
For people who die
after 2010, the federal estate tax will be revived with an exemption of
$1,000,000 and a maximum rate of 50%. But Congress is widely expected
to take action on the estate tax issue in 2010–too late to catch some
estates that have, by pure luck of timing (for their tax burden,
anyway), escaped estate taxes entirely.
tax credit for 2011
The $1,000 credit
per child may go back to $500 for 2011 unless the higher credit is
2011 Section 179 Deduction
must pay SE tax and file Schedule SE (Form 1040) if your net earnings
from self-employment were $400 or more. Use Schedule SE to figure net
earnings from self-employment.
Sole proprietor or independent contractor. If you are
self-employed as a sole proprietor or independent contractor, you
generally use Schedule C or C-EZ (Form 1040) to figure your earnings
subject to SE tax.
SE tax rate. The SE tax rate on net earnings is 15.3%
(12.4% social security tax plus 2.9% Medicare tax).
Maximum earnings subject to self-employment tax. Only
the first $106,800 of your combined wages, tips, and net earnings in
2010 is subject to any combination of the 12.4% social security part of
SE tax, social security tax, or railroad retirement (tier 1) tax.
All of your combined wages, tips, and net earnings in 2010 are
subject to any combination of the 2.9% Medicare part of SE tax, social
security tax, or railroad retirement (tier 1) tax.
If your wages and tips are subject to either social security or
railroad retirement (tier 1) tax, or both, and total at least $106,800,
do not pay the 12.4% social security part of the SE tax on any of your
net earnings. However, you must pay the 2.9% Medicare part of the SE
tax on all your net earnings.
Health Care Costs
Beat the rising
price of health care and meet your employees' coverage expectations by
balancing costs among everyone in your company.
Here are five
strategies for achieving a cost-sharing plan that's fair.
- Cap your
contribution when premiums rise, says Dean McSherry, CEO of Preferred
Restaurant Services in Addison, Texas, which provides specialized
services to more than 400 restaurants in 13 states. For example, if you
pay $180 of a $200 premium (90 percent), and the premium rises to $250,
continue to pay the $180 and hold the employee responsible for the rest.
by changing deductible or co-insurance amounts. Suppose you have a
"rich" 80/20 co-insurance PPO plan, with maximum out-of-pocket costs of
$2,000 and a $250 deductible. You could keep the plan but raise the
deductible to $1,000, McSherry says. Or, you could change the
co-insurance to 70/30. If you have hourly workers, you can further
reduce your costs by switching to a "mini med" program at their
expense, he says. A mini med is an indemnity insurance product that
offers limited medical coverage and pays a fixed dollar amount for
coverages provided. Employees have an option of $5,000, $10,000 or
$15,000 maximum coverage limit per year and choose how they use the
benefits. Mini med programs typically come with some prescription
prescription offerings. Add a deductible to your pharmacy benefit of
$250 or $500. Or offer a tiered plan: When new drugs come on the
market, the employee pays more for those "preferred" medicines. They
pay less for brand drugs that have been out longer and even less for
generic drugs. You also can use prescription discount cards, which give
employees price breaks when they shop for the lower-priced medicines.
to families. You may have to adjust the company contribution health
insurance benefit for employees' families, says Robert Hurley, vice
president of eHealth Insurance in Sacramento, Calif. Or, reduce the
amount of your contributions towards the premiums of an employee's
- Supplement your
plan with a Health Savings Account (HSA), Hurley says. If you're
uncomfortable about cutting back on family benefits, HSAs are an
attractive alternative. Your employees own the accounts and pay for
routine medical costs with tax-free dollars. The account can accumulate
for a nest egg, similar to an IRA. To offer HSAs to employees, you
first need to institute an HSA-eligible, high-deductible health plan.
Check with your provider to make sure your health plan qualifies.
"When you look
at HSAs, don't be afraid of the higher deductibles. It's where the
marketplace is going," Hurley says. "If you had car insurance that paid
for oil changes and the like, you'd never be able to afford it. We're
saying with a high deductible that we can't afford the ‘oil changes,'
but we'll be there for the big stuff. Work with your employees to
educate them on the benefits of HSAs."
You can tailor
your health care coverage according to the size of your business.
Self-employed: If you're
healthy, opt for a high-deductible plan that offers only catastrophic
coverage. If you're supporting a family, consider an HSA to supplement
Fewer than Five
Employees: Facing a
premium increase this year? Offset it by passing the full or partial
cost to your employees. It also may be time to shop around for a new
carrier and examine how you can implement HSAs.
More than Six
Employees: You probably
already have an established PPO or HMO in place, and your employees may
be reluctant to go for the higher-deductible HSAs. Consider changing
deductible or co-insurance amounts and re-examining your prescription
is a 1031 Exchange?
exchange can help a person to avoid some or all capital gains taxes on
the property sold. However, a 1031 exchange will only work for a person
seeking to purchase a similar type of property. For example, a landlord
selling one apartment to purchase another one could benefit from a 1031
replacement property must be identified within 45 days of closing, and
it must be acquired within 180 days of the closing. A qualified
intermediary must be used to aid the transaction;
property or item that is sold must be of like-kind to the property or
item or property in question must be used for the business or as an
cannot be deducted;
a loss cannot be recognized when the transaction occurs, it should be
carried forward and cause a higher basis for the property received in
certain cases, when the item in question is property, the basis of the
new purchase must be the same as the basis of the property sold, minus
any compensation received by the taxpayer, plus any gain recognized on
the transaction – if a loss occurs that will be subtracted as well in
of different sexes cannot qualify for this type of exchange although
livestock of the same sex does.
businesses can now
expense up to $500,000 of section 179 property for tax years beginning
in 2010 and 2011. Without SBJA, the expensing limit for section 179
property would have been $250,000 for 2010 and $25,000 for 2011.
& Retirement Plan Limits for 2011
The IRS will not increase pension plan limits for 2011. Plan
limitations are as follows:
Annual Limit employees 50 and older
408(p) Simple IRA $11,500