Tax Strategies 101University of Missouri Medical School

February 16th, 2011

Presented By:Evan McGinnis Financial Advisor

And James Pommert Financial AdvisorSecurities and investment advisory services through Securian Financial Services, Inc.,Member FINRA/SIPC. Renaissance

Financial is independently owned and operated. 5700 Oakland Ave. Suite 400 St. Louis, MO 63110

Key Tax Strategy Overview1) Tax Basics2) Deductions vs. Credits

Student Loans Education Credits

3) IRA vs. Roth IRA Tax advantages and disadvantages

4) Tax Strategy Know the Law Know Your Limits

5) Legal Strategies6) 1040 Example7) Advanced Tax Strategies

Tax BasicsAGISchedule A1040W-210991098-E

Deductions vs. CreditsWhat is the real difference????Example A: $1,000 Deduction

Example B: $1,000 Credit

1. Individuals taxable income from employment is $100,000.

2. They would be in the 28% tax bracket

3. For every $1,000 they deduct they will pay $280 less in taxes.

1. Individuals taxable income from employment is $100,000.

2. They are also in the 28% tax bracket

3. They receive a credit for $1,000.4. Instead of paying $280 less in

taxes they will actually pay $1,000 less in taxes.

Deductions vs. CreditsDeductions Credits

Student Loan InterestMortgage InterestIndividual ($5,700)

Joint ($11,400)Charity

Health Insurance PremiumsState Taxes

Personal Property TaxesSavings for College

IRA

EducationAdoption

Child CareDependent Care

Earned Income Tax

IRA vs. Roth IRAIRA Roth IRA Works the same way as a 401k Money is deducted from your taxable

income Invested in the market and you pay

taxes when you withdraw money. Magic age is 59 ½ with no penalty

Opposite of a IRA Money is paid in after it is taxed. The money is invested in the market

and you never pay taxes on it again. As long as you also wait until the

Magic age of 59 ½ In addition you always have access to

the original money put in without tax burden or penalties.

Tax StrategiesDisability Insurance

Employer PaidDisability Insurance

Personal Policy

1) Taxable Benefits2) Non-Portable3) More Restrictive Definition of

Disability

1) You Own and You Pay2) Tax Free Income Benefits3) Portable4) Better Riders Such as:

Future Income Purchase Options Own Occupation Rider Residual Disability

Tax StrategiesKnow the Law

Capital Gains Income Dividends Change from Year to Year (ex. C-corp)

Know Your Limits Contributions to 401k (maximum is $16,500) Income Limits:

IRA ($56,00 single filers, $89,000 for joint filers) with a max contribution of $5,000

Roth IRA ($106,000 single filers, $167,000 for joint filers) with a contribution max of $5,000

Financial advisors do not provide specific tax strategies. This information should not be considered specific tax strategies. You should consult your tax advisor for your own specific tax situation.

Legal StrategiesTrustsNeed a legal perspective on ways to save taxes.All of an individuals assets are included in an

estate.By establishing trusts individuals can minimize

the amount of taxes their heirs must pay

Financial Advisors do not provide legal advice. This information should not be considered as specific legal advice. You should contact your legal advisor for your own specific legal situation.

Debt Management Tax ImplicationsGood Debt vs. Bad DebtGood Rate vs. Bad Rate

Example:May be more beneficial to buy a house then to

rent. You can deduct your interest paid on the mortgage, reducing your taxable income and putting more money in your pocket.

234238 DOFU: 9/2010

1040 Tax Return

Schedule A

ExampleMalpractice insurance

Scenario:6 neurosurgeons in FloridaEach pays $75,000/annual premium for

$600,000 in coverage. $450,o00 total for practice

Advanced Tax Concepts: Captive Insurance Companies

Establish a CaptiveSpecific risk is underwrittenTax deductible contributions

reduces the taxes you pay each yearCash builds in captive for physicians

Cash is invested and grows Can be used to pay for future premiums Distributed at capital gains rates not income rates

15% vs. 35%?

Advanced Tax Concepts: Captive Insurance Companies

Qualified Personal Residence TrustAffluent physicians that own property

Primary Residence Lake/Ocean/City homes & condos Any Vacation

Tax saving strategy for a physician's heirsTransfers assets to the next generation in a tax

efficient manner

Advanced Tax Concepts: QPRT

QPRT’s: Scenario OnePhysician does not establish a QPRT and

passes 20 years from nowCurrent value of $1 million3% annual appreciation of the propertyWorth over $1.8 million at TOD!

$1.8 million enters into estate and is fully taxable2011 – 35%$630,000 tax bill

Physician establishes a QPRT and passes 20 years from nowDeed the home into the QPRTRetain the right to live in home for 15 yearsGift the right to the home after 15 years

Value of gift is PV of $1 million in 15 years at 4.6%*= $509,000

Property appreciates 3% annually = $1.8 million

$1.8 million not taxable at deathHeirs save approximately $630,000

QPRT’s: Scenario Two