With the presidential election over and the
potential expiration of the Bush-era tax cuts, tax planning for 2012 and beyond
will become more important than ever! Some of the more important issues that you may need to consider or
discuss with us are as follows:
- This
may not be the same as 2010, when the Bush-era tax cuts were extended for all
taxpayers. Both the climate and Congress
are different, so the end result may be different as well. If not extended, qualified dividends could
increase from 15% to 39.6%, or higher.
- The
employee social security rate is set to increase from 4.2% to 6.2% on January
1, 2013.
- Depending
upon your capital gain/loss situation, you may want to consider harvesting
capital gains in 2012, in order to take advantage of the 15% or lower tax rate,
which may increase to 20% in 2013.
- Determine
whether gifts should be made now, as the gift exemption of $5.12 million for
2012 may revert to $1 million in 2013.
In addition, the highest tax rate on gifts may increase from 35% to 55%.
- Be
prepared to accelerate income and defer deductions, if possible, in order to
take advantage of favorable tax rates in 2012, with tax rates expected to
increase in 2013, including the new 3.8% Medicare surtax on investment income
and the 0.9% increase in Medicare tax. Types
of income that will be subject to the surtax include: taxable interest, dividends, annuity income,
passive royalties, and rents.
- However,
itemized deductions may again be limited in 2013. Therefore, if your situation warrants, you
may want to consider accelerating these deductions into 2012.
If you have any questions, or would like to
further discuss your personal or business tax situation, please do not hesitate
to contact us. We appreciate your
business, and look forward to working with you!
