Taxpayers may want to wait until after the November elections to get a better sense of which often way the political wind gusts are blowing before choosing whether capital gains taxes are more likely to rise or to fall in the future. Investors may also consider the likelihood of some companies sitting on cash to spend a special dividend before 2013 in the event the law threatens to start taxing dividends as standard income again.
INVESTING IN TAX-EXEMPT BONDS
One option being discussed in order to avoid the increased Medicare taxes on net investment income may be to shift more investments to help tax-exempt bonds. Tax-exempt bonds generally supply a lower return, and an investment portfolio too heavily weighted in such bonds probably does not necessarily offer sufficient diversity, but it surely is one move to avoid the increased taxes with taxable investments.
Obama has proposed that this same categories of wealthy taxpayers that are subject to the improved Medicare taxes also be taxed on their municipal bond investments. Ever again, taxpayers can judge following your November elections how probable Obama’s budget proposals are to achieve traction in 2013.
GIFTING TO CHILDREN
The up-to-date unified gift and estate tax exclusion of $5 thousand thousand (actually $5, 120, 000 for 2012) will go back to $1 million within 2013 under current law. The maximum tax rate will likewise go from 35 percent to 55 percent. Most taxpayers is unwilling to accelerate their own deaths, but they might be ready to accelerate gifts to a lot more than current high exclusion portions.
Neither the Obama administration nor the Republicans are advocating a return to the $1 million exclusion. However, in an impasse, it might happen because no one can agree on how to remain it from happening.
ACCELERATING AND DEFERRING
Normally, taxpayers ought to try to postpone earnings and accelerate deductions. In the environment, however, of anticipated higher rates inside following year, 2012 is a year to consider the contrary strategy. Accelerate income to get it taxed at the low rates of 2012, and postpone deductions to allow them to offset income in 2013 that will otherwise be taxed for a higher rate than 2012 earnings.
REQUIRED DISTRIBUTIONS
One of the provisions that expired afterwards of 2011 was your provision permitting taxpayers over age 70-1/2 to make IRA distributions directly to charity avoiding taking those distributions inside income. Taxpayers who have used this strategy in the past and who would like to do so also for 2012 should make an effort to postpone required minimum distributions until after the November elections to see if Congress acts to help retroactively extend the provision.
In 2010, when Our lawmakers finally acted to retroactively increase this provision, recognizing this difficult position it experienced put taxpayers in as a result of not acting until Dec, it enacted a wonderful rule permitting taxpayers to elect to experience a qualified charitable distribution stated in January 2011 treated as having been made with Dec. 31, 2010. Congress might do something similar again this season, but if taxpayers have already taken required minimum distributions straightaway, it would be way too late to then handle the distribution as going directly to a charity.
ALTERNATIVE MINIMUM TAX
Miami Accountant.
Miami Accountant 2012 Tax Strategies 