Part 1 of 2
presented by Nicole Albrecht
Will the Bush-era tax cuts expire next year? We may not have an answer to that question for several months. After the November elections, you could see them extended once again. Nothing is certain: with the daunting financing challenges the federal government faces, they may finally expire in 2013.
If your goal is tax minimization, here are “to-dos” you might want to accomplish before 2013 arrives; alone or in combination, they could save you some money. Just one note beforehand: consult the tax or financial professional you trust before you make these moves, so you can see how they fit within your overall financial picture.
Sell some stocks or funds before 2013 arrives. If you sell highly appreciated investments that you have held for at least a year during 2012, you can exploit the current 0-15% capital gains rates. In 2013, all but those in the 15% income tax bracket will face 20% capital gains taxes. On top of that, a potential 3.8% Medicare surtax could be levied on certain net investment income for individuals with MAGI of $200,000+ and married couples with MAGI of $250,000+. Just think: you could use your tax savings for tuition, mortgage payments or other priorities.
Consider going Roth. If tax brackets reset to 2001 levels and stay there for years to come, then converting a traditional IRA to a Roth IRA may be a really smart move (future tax-free withdrawals of earnings, assets passing tax-free to heirs).
Part 2 of this article will appear in our October issue.
Nicole Albrecht may be reached at 951-719-1515 or nicolea@taxmanfred.com www.taxmanfred.com