Year-End Tax Planning (in Uncertain Times). Updated Oct. 31, 2012. Overview. Where Are We Now?. What We Do Know …. If Congress does nothing Bush tax cuts will expire Estate tax extenders will expire Super Committee Debt ceiling debate Required legislation to avoid “automatic” cuts
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Updated Oct. 31, 2012
State/local sales tax deduction
Bonus Depreciation (for 2012) dropped to 50%
Mortgage insurance premiums deduction
Student loan interest deductions
School teacher expenses
Charitable distributions from IRAs
Research tax credit
Section 179 limit dropped to $139,000 for 2012Key Provisions That Expired in 2011
Long-term capital gains (15% goes to 20%)
Qualified dividends – 0% / 15% eliminated
Phase-out of personal exemptions
Phase-out of itemized deductions
$1,000 child credit resets to $500
Section 168 Bonus Depreciation expiresProvisions That Expire in 2012
Likely that someof the expiring provisions maynot be extended
Also, consider the possibility that Congress waits until next year to do something
Possibility for a 60- or 90-day extension on everything
Why it is important to consider multiple years?Multiple Scenarios – Multiple Years
What is held in a taxable account vs. retirement account?
Consider Muni bonds (to avoid new Medicare tax in 2013)
Triggering long-term capital gains/losses?
Some may consider triggering gains if they plan on selling in the near future
Others will not trigger losses like they normally do at the end of the year
Not limited to investments, also consider ordinary incomeInvestments
Should you exercise them now?
Consider other factors (i.e., blackout periods, current FMV, etc.)
Consider ISOs as well
Understand how real estate will be treated under new Medicare tax
Transfers to younger generation (assuming you avoid Kiddie Tax rules)Other Considerations
A 100% charitable contribution this year (with a maximum rate of 35%) is better than a 20% deduction next year (even if the rate is 39.6% or higher)Charitable Contributions