2012-13 Tax Planning
– Prior to Debt Super Committee meeting deadline (Nov 23rd)
There are at least 60 income tax provisions scheduled to expire at the end of 2011 but even if they do the most significant income tax changes are expected in 2013.
The Bush tax cuts are set to expire and income tax rates rise in 2013. At that time, itemized deductions would once again be partially phased out, the estate tax exemption will drop precipitously and the estate tax rate will jump unless they are re-enacted. At the same time we’ll begin the new healthcare surtax in 2013 that will result in 3.8% tax increase on
certain types of investment income and a tax of almost 1% on wages above a specified threshold.
Between now and 2013, we expect much talk about changes but the Congressional bipartisan ‘supercommittee’ is considering controversial revenue-raising measures, such as limiting itemized deductions for high income tax payers and other altered tax treatments. The vote & recommendations on November 23rd will play a large part in our confidence that our economy will begin to grow soon before the tax increases in 2013.
Our long term success still remain with business growth and ability to create and support well paying jobs.
What does this mean for investors? That we plan for what we know, not what might happen. But we keep our eye on what changes are approved so that we can adjust and still reach your personal and professional goals.
This year and next year (are consistent with 2010) present us with tactical and strategic decisions that may require action before those rules expire.
Here are two lapsing provisions:
AMT Patch was extended from 2010 to 2011. If Congress
does not extend it, the AMT exemption for 2012 would
return to earlier, lower levels and will result in more tax owed.
The portion of the Federal Insurance Contributions Act (FICA) tax that goes to Social Security was reduced temporarily in
2011 from 6.2% to 4.2%. With no extension, the higher rate
returns in 2012.
Edi Alvarez, CFP®
BS, BEd, MS