24 Oct 2013 Year-end Tax Planning
To Our Clients and Friends:
As we approach year-end, it’s again time to focus on last-minute moves you can make to save taxes both on your 2013 return and in future years.
For most individuals, the ordinary federal income tax rates for 2013 will be the same as last year: 10%, 15%, 25%, 28%, 33%, and 35%. However, the fiscal cliff legislation, passed early this year, increased the maximum rate for higher-income individuals to 39.6% (up from 35%). This change affects taxpayers with taxable income above $400,000 for singles, $450,000 for married joint-filing couples, and $425,000 for heads of households. In addition, the new 0.9% Medicare tax and 3.8% Net Investment Income Tax (NIIT) potentially kick in when modified adjusted gross income (or earned income in the case of the Medicare tax) goes over $200,000 for unmarried, $250,000 for married joint-filing couples, which can result in a higher-than-advertised federal tax rate for 2013.
Despite these tax increases, the current federal income tax environment remains relatively favorable by historical standards. This series of posts presents a few tax-saving ideas to get you started. As always, you can call on us to help you sort through the options and implement strategies that make sense for you.
2013 Year-end Tax Planning Ideas:
Ideas for Your 2013 Year-end Business Tax Planning
Ideas for Maximizing Nonbusiness Deductions
Making the Most of Year-end Securities Transactions
Year-end Tax Planning Ideas for Seniors Age 70 1/2 Plus
Also, don’t overlook Estate Planning. For 2013, the unified federal gift and estate tax exemption is a historically generous $5.25 million, and the federal estate tax rate is a historically reasonable 40%. Even if you already have an estate plan, it may need updating to reflect the current estate and gift tax rules. Also, you may need to make some changes for reasons that have nothing to do with taxes.
Through careful planning, it’s possible your 2013 tax liability can still be significantly reduced, but don’t delay. The longer you wait, the less likely it is that you’ll be able to achieve a meaningful reduction. The ideas discussed in this letter are a good way to get you started with year-end planning, but they’re no substitute for personalized professional assistance. Please don’t hesitate to call us with questions or for additional strategies on reducing your tax bill. We’d be glad to set up a planning meeting or assist you in any other way that we can.
Very truly yours,
Joel I. Levy, CPA, MST, PFS
Since each person’s situation is unique and tax laws are constantly changing, please call me or consult your tax professional.