Given the political landscape for 2013, the choices you make in preparing your 2012 tax returns may carry greater importance than usual. 2013 will bring a wide variety of changes:
- 9% Medicare Surtax for the self-employed as well as high income earners with incomes over $200k(s) and $250k(mfj).
- A new Medicare tax of 3.8% on all unearned income.
- Unless Congress acts, the Section 179 deduction will fall to $25,000 from it’s current $139,000.
- Bonus Depreciation will completely disappear.
- The threshold for the Medical Deduction will rise to 10% from it’s current 7.5%.
- Don’t be surprised to see reinstatement of the 36% and 39.6% tax brackets next year.
- The Capital Gains rate for high income earners may rise to 20% along with a 28% rate cap for itemized deductions.
- Finally, the Transfer Tax exemption falls from it’s current $5.12m(s)/$10.24m(mfj) to only $1m(s)/$2m(mfj).
So given the changes ahead you may want to consider moving income into 2012 by selling appreciated assets, taking royalty, bonus or dividend payments currently. Consider moving any elective medical procedures to this year. You may also want to complete your Roth conversions by year-end. Similarly, you may want to push deductions into next year. Pay your state income tax estimates in 2013. Make your January 2013 mortgage payment in January. Delay any large charitable donations until next year. Donate appreciated assets next year to deduct their full market value and avoid paying capital gains taxes. However, sell underwater assets next year to claim the loss deductions and then donate the cash. Consider making any substantial gifts to heirs and others this year to avoid additional gift, GST and estate taxes. If you anticipate purchasing any substantial assets for your business next year, you may want to purchase, pay for (you can use a credit card) and put in service those assets this year to take advantage of expiring Section 179 and Bonus Depreciation deductions. Remember that these provisions may increase the attractiveness of Municipals and other tax exempts next year, reducing their relative yields in the future. Be sure to pay attention to how these changes may impact your Alternative Minimum and Kiddie Tax situation. If have a staffing need in your office, you may want to consider hiring an out of work veteran before year-end to avail yourself of a potential $9,600 tax credit that expires at the end of this year. Finally, for those who procrastinate, your returns must be postmarked by their due dates. If you use a private delivery service such as FedEx, DHL or UPS, the IRS may not consider your return timely filed if you try to save a few bucks by using something other than their overnight or next day services.
For questions or to discuss these ideas further, contact Joe DeMarco, CPA or Joe Skibinski CPA/MBA at 708.629.7985 or jd@dscpagroup.com and jskibinski@dscpagroup.com, respectively. Joe DeMarco is a partner and Joe Skibinski is a Manager at DeMarco Sciaccotta Wilkens & Dunleavy, LLP. Remember that your own individual circumstances may have significant impact on the ideas discussed here and you should always consult with your own tax professional before making any decisions.
