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Year End Planning

Dear Clients:

With Deb Wise on our staff, who is a Certified Public Accountant, we are able to remind you of Tax advantages that come along. I wanted to pass along to you some quick year end thoughts.

1. Thanks to President Bush's tax bill, we have a new maximum tax rate of 15% on long term capital gains incurred after May 15, 2003. There is no guarantee that this low tax rate will stay in effect for a long period of time, therefore, you may want to consider some year end sales to take advantage of this low tax rate.

2. Also, please note that in the same tax bill the maximum tax rate on dividends has been limited to 15%. Once again, your financial planning may encourage you towards stocks which pay high dividends because these dividends less expensive, from a tax point of view, than other kinds of income.

3. For those of you who have a business, I would note that the 179 election, which allows you to immediately write off business purchases, rather than depreciate them, has been bumped from $25,000.00 to $100,000.00 for the years 2003 and 2004. If you are planning on making any kind of significant equipment purchases in your business feel free to be able to write those off this year and next year at a higher level than the old $25,000.00 amount.

4. Remember, if you are involved in a qualified plan such as 401k or SIMPLE, you have additional deductions available if you over age 50, called "catch-up deductions". Even IRA's now have an available deduction of $3,000.00 with an extra $500.00 catch-up amount if you are 50 or over. Don't miss out on putting these extra funds into your retirement plan.

5. If you are making estimated payments for your income you need to deal with the question of how much those estimated payments will be next year. Because of the reduction in tax rates you may find that you need to send less money in on estimated payments. The IRS website at irs.gov can help you calculate that. Search the IRS website for "tax cuts", and you will find many articles. Go to the article titled "New Law's Tax Cuts Mean Extra Cash Now". Scroll down there and you will find a site titled "Estimated Tax Payment (Individuals)" which will help you adjust your estimated tax payments.

6. Finally, we always encourage our clients to carefully review the advantages of a 1031 Tax Free Exchange if they are selling real estate. If you are planning to sell any of your real estate in the coming year with the expectation of rolling those funds over into other real estate, please talk to us about how you can do that without paying taxes. More about this next month.

Best wishes to you for a Joyous Christmas and Happy New Year.

Very truly yours,

William S. Dick

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Dick, Stein, Schemel, Wine & Frey, LLP

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Waynesboro, PA 17268
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