No Time Like the Present for Mid Year Tax Planning!

By David M. Kendrick, CPA, MST

Now is the perfect time to seize the opportunity to do some mid-year tax planning before summer vacations and the dog days of summer fall upon us in full force and the competing demands of back to school and the holiday season swing into play.  Act now to fine-tune your 2012 tax strategies and prepare for the “Fiscal Cliff” coming in 2013!

Here are just a few ideas to consider:

• Review estimated tax payments and wage withholding to minimize the potential for underpayment penalties
• Maximize pension or 401(k) contributions
• Convert a regular IRA to a Roth IRA to maximize lower tax brackets and capture tax-free growth
• Maximize charitable contribution deductions by gifting appreciated property
• Harvest losses on investments to minimize capital gain taxes
• Review minimum required IRA or pension plan distributions

Assuming no action by Congress, there are several tax law changes set for 2013 that could take a bite out of your budget: 

• Individual income tax rates will increase so accelerating income into 2012 may pay dividends
• Long-term capital gains rates will increase from 15% to 20% (23.8% if Adjusted Gross Income exceeds $200,000 single /$250,000 married)
• The gift and estate tax exemption will drop from $5.12 million to $1 million and rates will increase
• Taxpayers with AGI that exceeds $200,000/$250,000 will be subject to a 3.8% Medicare surtax on net investment income, raising marginal income tax rates. Taxpayers in the top 39.6% bracket will potentially face a 43.4% marginal rate!

There is no time like the present to re-visit your tax planning strategies. Please give us a call to reserve your planning appointment today.