Welcome 2012! As the New Year rolls around, it's always a sure bet that there will be changes to the current tax law and 2012 is no different.  Here's a checklist of tax changes pertaining to families and children to help you plan the year ahead.

"Kiddie Tax"
For taxable years beginning in 2012, the amount that can be used to reduce the net unearned income reported on the child's return that is subject to the "kiddie tax," is $950. The
same $950 amount is used to determine whether a parent may elect to include a child's gross income in the parent's gross income and to calculate the "kiddie tax". For example, one of the requirements for the parental election is that a
child's gross income for  2012 must be more than $950 but less than $9,500. 
 

For 2012, the net unearned income for a child under the age of 19 (or a full-time student under the age of 24) that is not
subject to "kiddie tax" is $1,900, the same as 2011.

Family coverage.

For taxable years beginning in 2012, the term "high deductible health plan" means, for family coverage, a health plan that has an
annual deductible that is not less than $4,200 (up $150 from 2011) and not more than $6,300 (up $250 from 2011), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $7,650 (up $250 from 2011).

Adoption Assistance Programs

For taxable years beginning in 2012, the amount that can be excluded from an employee's gross income for the adoption of a child with special needs is $12,650. In addition, the maximum amount that can be excluded from an employee's gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $12,650 (down from $13,360 in 2011). The amount excludable from an employee's gross income begins to phase out under for taxpayers with modified adjusted gross income (MAGI) in excess of $189,710 and is completely phased out for taxpayers with modified adjusted gross income of $229,710 or more.

Taxpayers adopting children are eligible for both the adoption credit (see below) and the adoption assistance exclusion of
adoption expenses paid for through an employer's adoption assistance plan. However, the same adoption expense cannot
qualify for both the adoption credit and the adoption assistance exclusion. 
 
Individuals - Tax Credits
Adoption Credit

For taxable years beginning in 2012, the credit allowed for an adoption of a child with special needs is $12,650. For taxable years beginning in 2012, the  maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $12,650. The available adoption credit begins to phase out for taxpayers with modified adjusted gross income (MAGI) in
excess of $189,710 and is completely phased out for taxpayers with modified adjusted gross income of $229,710 or more.

Child Tax Credit
For taxable years beginning in 2012, the value used to determine the amount of credit that may be refundable is $3,000. 
 
Earned Income Credit

For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011. The credit varies by family size, filing status and other  factors, with the maximum credit going to joint filers with three or more qualifying children. In addition, for taxable years beginning in 2012, the earned income tax credit is not allowed if certain
investment income exceeds $3,200.

Additional Child Credit
The $1,000 per-child additional child tax credit has been extended through 2012. The credit will decrease to $500 per child in
2013.

Individuals - Education

Hope Scholarship - American Opportunity, and Lifetime earning Credits
The maximum Hope Scholarship Credit allowable for taxable years beginning in 2012 is $2,500.

The modified adjusted gross income (MAGI) threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.

Interest on Educational Loans
For taxable years beginning in 2012, the $2,500 maximum deduction for interest paid on qualified education loans begins to phase out for taxpayers with modified adjusted gross income (MAGI) in excess of $60,000 ($125,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of $75,000 or more ($155,000 or more for joint
returns).

For more info visit our website: http://www.dellapostacpa.com/

Tax Rules Relating to 529 College Savings Plans

Income Tax. Contributions made by the account owner or other contributor are not deductible for federal income tax purposes. Earnings on contributions grow tax-free while in the program.

Distributions from the fund are tax-free to the extent used for qualified higher education expenses. Qualified expenses include tuition, required fees, books, supplies, equipment, and special needs services.
For someone who is at least a half-time student, room and board also qualify.

Tip: In 2009, the American Recovery and Reinvestment Act (ARRA) added expenses for computer technology/equipment or Internet access to the list of qualifying expenses. Software designed for sports, games, or hobbies does not qualify, unless it is
predominantly educational in nature. In general, however, expenses for computer technology are not qualified expenses for the American Opportunity Credit, Hope Credit, Lifetime Learning Credit, or tuition and fees deduction.

Gift Tax. For gift tax purposes, contributions are treated as completed gifts even though the account owner has the right to withdraw them - thus they qualify for the up-to-$13,000 annual gift tax exclusion. One contributing more than $13,000 may elect to treat the gift as made in equal installments over that year and the following 4 years, so that up to $65,000 can be given tax-free in the first year.

 Estate Tax. Funds in the account at the designated beneficiary's death are included in the beneficiary's estate - an odd result,
since those funds may not be available to pay the tax.

Funds in the account at the account owner's death are not included in the owner's estate, except for a portion thereof where the gift tax exclusion installment election is made for gifts over $13,000. For example, if the account owner made the election for a gift of $65,000 in 2011, a part of that gift is included in the estate if he or she dies within 5 years.

Tip: A Section 529 program can be an especially attractive estate-planning move for grandparents. There are no income limits, and the account owner giving up to $65,000 avoids gift tax and estate tax by living 5 years after the gift, yet has the power to change the beneficiary.

State Tax. State tax rules are all over the map. Some reflect the federal rules, some quite different rules. For specifics of each state's program, see http://www.collegesavings.org.

If you would like more information about 529 Savings Plans or saving in generalfor post please call us. We're more than happy to help. Contact our office at 508-540-3683 or email me directly at gary@dellapostacpa.com

Rev up your childrens imaginations as they explore all kinds of trucks and vehicles on display at the Falmouth High School Parking Lot. There will be fun activities and refreshments for purchasing. Tickets sold at WFL, 8 Cousins, and at the event.

On Saturday, Sept. 24 from 10 a.m. to 2 p.m., the West Falmouth Library will present a Touch A Truck fundraising event held at the Falmouth High School parking lot. The rain date is Sunday, September 25 from 10 a.m. to 2 p.m.

Children of all ages are invited to explore a variety of trucks and vehicles such as construction vehicles, safety vehicles and others. There will be fun activities and refreshments will be available for purchase.  Kids will be able to decorate a hat and purchase some yummy icecream which will also benefit West Falmouth Library!  Several local businesses are providing the trucks and the following local businesses have generously supported this family fun event: Chapman, Cole & Gleason, Clover Paving Company, C.L. Noonan and Mashpee Physical Therapy at Deer Crossing.

Admission price is $5 per family. Tickets are available until Sept. 23 at the library and at Eight Cousins children’s bookstore, 189 Main St., Falmouth. They will also be available at the event but attendees are encouraged to buy their tickets in advance.

For more information, visit westfalmouthlibrary.org or call 508-548-4709.
Please consider volunteering at this event - sign up at the library now. Your help is greatly appreciated.

Fishing................... Need I say more?

It is my favorite activity.  I find a whole range of emotions in this simple yet complicated activity: joy, excitement, frustration, patience, etc.

Fishing takes a lot of skill, patience and determination.  These are skills that I want my son to exhibit as he grows.   These base skills are what will help shape him into a MAN. 

As my son now approaches his FIRST birthday, I get excited thinking about the bonding time we will spend together as I teach him the quiet art.  Already he watches with his bright baby blues as I cast, reel, and pull out a fish.  His small mouth lights up in a smile as he see the fish and then watches as I let it back into the water. he is FASCINATED, just as I was!

I can't wait for the day he catches his first fish!  Though I know that it is still a ways off, I look forward to the quiet father son bonding time we will have together, just as I did with my father and grandfather.  And hopefully someday I will be able to take him back to the family bait shop where we spent so many great days and nights creating some amazing childhood memories, and he will become passionate about it as I am, and pass it along one day to his children. 

Our Fall Session of childrens programming starts on Tue. Sept. 13. MGOL will be held on Tues. & Fri. at both 10:15 & 11:15. Story Boat will be at 10:15 on Tuesdays and Fridays.

Please Note: There will not be any children's programs on Friday, October 7; Friday, November 11; the week of Thanksgiving, Nov. 22 and Nov. 25 and Friday, Dec. 9.

Mother Goose on the Loose is a drop-in program, lead by staff member, Amy Sellers. This Fall, MGOL will meet 4 times during the week. “Mother Goose on the Loose” is free and open to all area families, pre-registration is not required at this time, however our goal is to have no more than 15 children and their care-givers in one session. Please choose one MGOL session a week to attend. “Mother Goose on the Loose” is a thirty-minute literacy program designed for children from birth to age three and their caregivers. The program was developed by Dr. Betsy Diamant-Cohen, and combines principles of successful library “lapsit” programs and elements from Barbara Cass-Beggs successful music enrichment programs entitled, “Your Baby Needs Music” and “Your Child Needs Music”.

“Mother Goose on the Loose” incorporates findings in child development and brain research with activities and methods that promote early literacy and school readiness skills. Each session follows a script that uses repetition; and tactile, rhyme, rhythm, listening, and movement activities. Typical sessions begin with the poem “Old Mother Goose” followed by finger plays, flannel board activities, puppet shows, stories, songs, movement activities, playing with scarves, bells, and drums, and interactive play. Each session ends with a lullaby, a quiet poem, and a signature good-bye.

The program’s design and implementation carefully considers aspects of brain development in babies and young children. Research shows that the development of intellectual, emotional, and social intelligence in babies and children is most affected by experiences that are frequent, regular and predictable; experiences that occur in the context of a warm and supportive environment; experiences that are associated with positive emotion and play; and experiences that encourage a child’s curiosity and initiative.

Story Boat, a preschool story time for ages 2.9-5 years will be on Tuesdays and Fridays at 10:15 a.m. downstairs in the Sunshine Room. We invite MGOL parents with pre-school aged children to choose the Friday sessions as we offer early literacy programs for both ages. We welcome new staff member, Rosemary Modic who will lead Story Boat. Story Boat provides a developmentally appropriate story time with a craft.

Congratulations to Brian Moore-Winner of our $50 gift certificate to Not Your Average Joe's in Hyannis!
Thank You to all our dads who participated! 
Stay tuned for our next fabulous giveaway! 

Saving with 529 Qualified Tuition Plans Section 529 plans, also known as Qualified Tuition Programs, are the best choice for many families.

Every state now has a program allowing persons to prepay for future higher education, with tax relief. There are two basic plan types, with many variations:

1.) The Prepaid Education Arrangement. You essentially buy future education at today's costs, by buying education credits or certificates. This is the older type of program, and it tends to limit the student's choice of schools within the state.

2.) Education Savings Accounts. You contribute to an account earmarked for future higher education.

Tip: When approaching state programs, one must distinguish between what the federal tax law allows and what an individual state's program may impose.

You may open a Section 529 plan in any state. But when buying prepaid tuition credits (less popular than savings accounts), you often need to apply the credits to a specific college or group of colleges.

Unlike certain other tax-favored higher education programs, such as the Hope and Lifetime Learning Credits, federal tax law doesn't limit the benefit only to tuition. Room, board, lab fees, books, and supplies can be purchased with funds from your 529 Savings Account. (Individual state programs could be narrower.)

The key parties to the program are the Designated Beneficiary, the student-to-be, and the Account Owner, who is entitled to choose and change the beneficiary and who is normally the principal contributor to the program.

There are no income limits on who may be an account owner. There's only one designated beneficiary per account. Thus, a parent with three college-bound children might set up three accounts. (Some state programs don't allow the same person to be both beneficiary and account owner.)

Gary M. DellaPosta is a CPA located in Falmouth. He has been in practice for over 30 years.  Stay tuned next week to read about tax implications regarding 529 plans.