Tax Consulting

Every year, Congress enacts tax laws that create numerous deductions, exclusions, and credits that could significantly reduce your tax liabilities if you fulfill the appropriate requirements. Maximize your potential for tax savings by consulting with Charles A. Randall, P.C. before you engage in an income-producing activity, incur business expenditures, or enter into a property transaction. The following examples scratch the surface of recent tax law developments.

If a member of your family is enrolled in an undergraduate or graduate program, you may be able to take advantage of the Lifetime Learning Credit. The credit may allow you to reduce your federal tax liability by as much as $1,000 ($2,000 beginning in 2003). In addition, you may be able to deduct up to $2,500 per year for interest paid on student loans. If you are starting to save for a child’s future college education, consider Qualified State Tuition Programs, or "529 Plans," which allow you to invest money now and then make tax-free withdrawals to pay for qualified higher education expenses.

If you are planning to sell your home, you may be able to exempt up to $250,000 (or $500,000 if you are married) of profit from federal income taxes. There is no limit to how often you may use this home sale exemption. However, to qualify for the exemption, the house you are selling must have served as your principal residence for at least two out of the five years leading up to the sale.

With respect to other property transactions, the maximum tax on capital gains is generally 20 percent as long as you hold a capital asset for more than a year before selling it. For assets purchased after 2000 and held for more than five years, the maximum tax on capital gains will only be 18 percent.

Businesses may be able to deduct up to $24,000 ($25,000 beginning in 2003) for the cost of "business use" personal property items such as furniture, office equipment, and computers for the year that these items are purchased. Depreciation deductions may be taken over subsequent years for any of the cost of these items that exceeds the maximum deduction allowed in the year of purchase.

Small businesses that incur expenses associated with setting up a qualified pension plan may be eligible for a tax credit of up to $500 (per year for three years). To use the credit, the company must not have had more than 100 employees who earned $5,000 or more in the prior year.