Opportunities from the
2001 Tax Act


Year-end tax planning is always important. After a tax bill with significant changes, however, tax planning becomes even more important because you don't want to lose out on opportunities that are available to you. Here are a few ideas on how you could benefit from the new provisions:

• Rate reductions and advance refund checks. The Act created a new 10 percent tax bracket. IRS sent "advance refund checks" to taxpayers for all or part of their 2001 tax savings as a result of this bracket change. In addition tax rates for the 28 percent bracket and above will be reduced over the next five years, so you may want to reduce your tax liability this year by deferring income or accelerating deductible expenses. You will also want to consider the effect of the alternative minimum tax and farm income averaging on your overall tax impact.
• College tuition deductions. Beginning in 2002, a new deduction of up to $3,000 will be available for some postsecondary tuition costs - even if you don't itemize deductions. This deduction will not be available if you also claim the Hope Scholarship Credit or Lifetime Learning credit, however.
• Increased IRA contributions. Contribution limits for traditional and Roth IRAs will rise from $2,000 to $3,000 next year (or $3,500 if you are 50 or older by the end of 2002). Contributions to a SIMPLE retirement plan will also increase. The maximum deferral will increase to $7,000 next year and go up another $1,000 each year until it reaches $10,000. "Catch-up" provisions for taxpayers over 50 increase contribution limits for SIMPLE and other retirement plans.
• Estate tax changes. The estate tax exemption will increase from $675,000 to $1 million next year, and to $3.5 million by 2009. So you may want to rethink your estate plans.

Year-end tax planning - now more than ever
The combination of tax law changes with economic changes in agriculture make year-end tax planning especially important this year. Sit down with your tax adviser before the end of the year to take advantage of all options that are available to you.

For answers on how the recent tax law changes apply to you, contact your Yankee Farm Credit tax specialist today! Remember you only have until December 31 to take advantage of the tax law changes on your 2001 tax liability.

Farm Credit can help
For more information, contact us at info@yankeeaca.com today! Our tax specialists are ready to answer your questions or prepare your business or personal returns for you.

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