berkowitz pollack brant advisors and accountants

Tax Credits for Making Your Home Energy Efficient by Jeffrey Mutnik

Posted on April 08, 2013 by

Taxpayers who added energy-efficiency to their homes in 2012 may qualify for credits.

  • Adding certain energy-saving items to a US primary residence can create eligibility for a credit equal to 10 percent of the cost. Insulation, windows, doors and roofs are typical upgrades.
  • For some items, the entire cost is eligible to be claimed, including qualified water heaters and qualified heating and air conditioning systems.
  • There is a maximum lifetime limit of $500, of which only $200 can be used for windows.
  • The credit was recently extended through the end of 2013. T

A second type of credit is called the Residential Energy Efficient Property Credit and related to alternative energy sources.

  • The tax credit is 30 percent of the cost of alternative energy equipment, including solar hot water heaters, solar electric equipment and wind turbines.
  • There is no limit on the amount of credit available for most types of property.
  • Credits are available only for US properties, but are not limited to primary residences.
  • The credit is available through 2016.



Jeffrey Mutnik CPA/PFS is a director in Berkowitz Pollack Brant’s Taxation and Financial Services practice. For more information, call (305) 379-7000 or e-mail


Estate Planning in the New Environment by Joseph L. Saka

Posted on March 26, 2013 by Joseph Saka

Many people with wealth to protect are sleeping better at night because their fortunes aren’t large enough to expose them to federal estate tax. But no one should close their eyes to the fact that, regardless of your income, estate planning remains an essential tool for protecting loved ones.

The federal government has decided to continue its recent practice of limiting the bite of the estate tax to individual assets above $5 million. The threshold had been scheduled to freefall to $1 million on January 1, which would have exposed far more people and personal assets to the estate tax.

A new federal law called the American Taxpayer Relief Act reset the estate-tax exclusion at $5 million and annually adjusts this amount for inflation. The inflation-adjusted exclusion from federal estate tax for this year is $5.25 million of assets per individual, or $10.5 million for a married couple. The individual exclusion last year was $5.12 million.

Even for people with less wealth, estate planning remains a must. Good fortune, after all, will boost many successful individuals’ net worth to taxable levels in the future. Also, lawmakers conceivably could reverse course and expose more Americans to estate tax as they try to trim the federal debt.

Among other changes, the new law capped the federal estate tax rate at 40 percent, up from 35 percent last year.  That actually was a relief for taxpayers because the top rate had been scheduled to rise January 1 to 55 percent. In addition, the American Taxpayer Relief Act put a 40 percent cap on the federal tax rate on estates, gifts to children and others, and generation-skipping transfers to grandchildren.

The law also unified lifetime exclusions for estates, gifts and generation-skipping transfers at a combined total of $5 million per individual plus an adjustment for inflation. This means any mix of estate assets, gifts and generation-skipping transfers up to the amount of the lifetime exclusion is free from federal estate tax.

Remember, though, the lifetime gift exclusion applies only to amounts in excess of the annual gift exclusion, which is $14,000 per person this year (or $28,000 for a married couple), up from $13,000 last year. It is scheduled to increase in certain years in $1,000 increments.

Exclusion portability, a major feature of the new law, can be extremely beneficial to widows and widowers. Under the new federal law, if a deceased husband made partial use of the lifetime exclusion from estate tax and gift tax,  his widow can add his unused portion to her lifetime exclusion. (Exclusion portability is unavailable for generation-skipping transfers.)

For example, if husband dies this year after donating $2 million of gifts during his lifetime, and he leaves his wife an estate worth $8 million, she could avoid paying federal estate tax. How? She could add to her $5.25 million lifetime exclusion the $3.25 million of his lifetime exclusion that went unused. Pay attention to the fine print, though: Unused-exclusion portability is possible only if an election is made on the federal estate tax return of the deceased spouse.

The new federal law also allows older Americans to make tax-free charitable donations from Individual Retirement Accounts, or IRAs. A taxpayer who is at least 70 1/2 years old can directly transfer as much as $100,000 from an IRA to a charity without paying federal tax on the transfer.

Taxpayers can use various types of irrevocable trusts to remove assets from their estate to avoid or minimize estate tax. For example, a spousal trust allows a businessman to transfer income-producing assets to his wife to reduce his personal net worth for estate tax purposes. Many couples prefer this type of trust to others that are harder for them to control.

Life insurance is a tricky component of estate planning. Proceeds from life insurance policies are exempt from federal income tax. But for tax purposes, such income is considered part of the deceased person’s estate if the deceased bought the insurance. A better approach is setting up an irrevocable trust that obtains the life insurance policy and pays the premiums, because when the insured dies, the payout will stay out of his or her estate.

Don’t think of trusts, however, as purely a tax drive vehicle.  Trusts can be an important part of an estate plan, but they can be used for many different purposes.  Gifts or bequests into trusts that have adult children as beneficiaries can better protect their assets from divorce, creditors and lawsuits.  Use of trusts for the surviving spouse will help ensure that the spouse is taken care of but should the spouse remarry, the assets that have accumulated during the course of your marriage remain only for the surviving spouse and/or the children.  By having assets titled in trust, one can keep certain property out of your probate estate which may avoid many of the hassles, costs and lack of privacy concerns related to probate.

The American Taxpayer Relief Act didn’t change several types of legal techniques for minimizing federal estate tax. For example, it preserved grantor-retained annuity trusts, which allow taxpayers to transfer appreciation on their assets tax-free to others. The new law also preserved the ability of business owners to discount stock in their privately held businesses for estate tax purposes based on illiquidity, or the narrow market for such stock.

Even if you don’t get hit by the estate tax, the process of estate planning puts a worthy focus on your legacy. Creating a will, maintaining the right amount of life insurance, and other estate-planning tasks are critical. Calculating estate tax liability, if any, is just part of the process of giving your assets a life of their own.


 Joseph L Saka CPA/PFS is director in charge of Berkowitz Pollack Brant’s Tax Services practice. For more information, call (305) 379-7000 or e-mail


Impact of American Taxpayer Relief Act on Roth IRAs by Sean Deviney

Posted on January 31, 2013 by Richard Berkowitz, JD, CPA

The American Taxpayer Relief Act passed by Congress in early January addresses conversions of pre-tax 401(k) accounts to Roth. Until now, participants in a 401(k) could not convert their pre-tax 401(k) account to a Roth 401(k) unless they qualified for a distributable event (i.e. termination of employment, age 65, etc.).

The new tax law now opens up this opportunity to everyone. Companies will be required to amend their plan documents to include the new feature. The IRS is the process of clarifying a number of issues.

Our Employee Benefit Plans group can assist in amending documents, creating qualified plan, education and other components of this new opportunity for employees. Call Sean Deviney at (954) 712-8888 for more information.

Preparing Small Business for the Fiscal Cliff by Kenneth Strauss

Posted on November 20, 2012 by

By Kenneth J. Strauss CPA/PFS CFP Director of Tax and Personal Financial Planning. Berkowitz Pollack Brant Advisors and Accountants

Small-business owners across the country are on unsteady ground as they await word from Washington on how our government will tackle the record number of automatic tax increases and spending cuts that are set to take effect after the New Year. The uncertainty surrounding this “fiscal cliff” has put typical end-of-year planning in disarray as business owners wait and see what Washington will do.

What’s at Stake?

Whether Washington fails to make a deal and leads the country in a downward freefall, compromises or postpones sequester cuts leaving us hanging until the middle of 2013, the fact is that small businesses will be impacted in one way or another by these looming policy changes, some of which include:

  • The disappearance of the 2 percent payroll tax holiday
  • The addition of a 0.9 percent Medicare tax on wages of employees and self-employed individuals considered high-income earners (individuals earning more than $200,000 and couples earning more than $250,000)
  • The introduction of a 3.8 percent Medicare surtax on investment income for high-income filers
  • The return of the Alternate Minimum Tax (AMT), which will put a larger number of small business owners and the middle class at risk of falling under this provision
  • The rise of individual income tax rates to a maximum of 39.6 percent, which will increase the tax liability on pass-through businesses that report business income on personal returns
  • The phase-out of various tax credits, deductions and exemptions
  • The increase in estate taxes to 55 percent and the decrease in exemptions to $1 million

The first step to maneuver through these uncertain times is to meet with financial and tax advisors in advance of the New Year to develop back-up plans that incorporate various strategies and courses of action to take.

New Strategies for Uncertain Times

Conventional tax planning advises small-business owners to minimize income and maximize deductions in order to reduce or postpone their tax liabilities. However, in an environment of higher tax rates, the opposite holds true. Business owners should instead accelerate income into 2012 and defer deductions and losses until 2013.

For example, to maximize income for the current tax year, business owners may opt to accelerate distributions or take a large bonus before the end of the year and delay payment of some expenses until 2013. Likewise, while it is not effective to pre-bill for undelivered goods or services, expediting the shipping and invoicing of products before the end of the year will effectively maximize earnings in 2012.

With the almost certain rise in capital gains taxes, business owners engaged in installment sales should consider opting out of installment sale treatment and paying taxes on the full gain now. By doing so, business owners can take advantage of the current 15 percent long-term capital gain rate rather than the potential 23.8 percent rate they would face by deferring the gain to 2013. Similarly, owners in the midst of negotiating a sale of their businesses might consider coming to terms with a buyer before Dec. 31 to avoid the nearly 9 percent tax increase.

While keeping a watchful eye on their own finances, business owners should not overlook how these changes to the tax code will affect their employees. Therefore, it is imperative that small-business owners meet with their employees now and advise them that if the payroll tax holiday expires, they will see a decrease in their take home pay.

Rather than throwing caution to the wind and waiting for Washington to act, small-business owners should meet with their tax advisors now and take the time to carefully peer over the cliff and develop various strategies that address all potential scenarios. Doing so will ensure they will be prepared to implement the appropriate plan when needed.

About the Author:

Kenneth Strauss CPA/PFS is a director in the tax practice at Berkowitz Pollack Brant Advisors and Accountants. Strauss is president-elect of the Florida Institute of Certified Public Accountants (FICPA). Founded in 1905, the FICPA works to advance the accounting profession and provide growth and education opportunities for its 18,000 members. For more information, call (954) 712-7000 or e-mail

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