FORUM Credit Union's website works best with JavaScript enabled

Year-End Tax Planning

As 2012 draws to a close, it’s important to be aware of upcoming tax changes and how to best plan for your specific situation.

The Bush-era tax cuts are scheduled to expire on December 31, 2012.  If Congress doesn’t act by year-end, the maximum tax rate on ordinary income will increase to 39.6%, the rate on long-term capital gains will increase to 20%, and dividends will be taxed as ordinary income.  New taxes are also scheduled to go into effect in 2013, including a 3.8% Medicare surtax on investment income and an additional 0.9% Social Security tax on wages and self-employment income in excess of $250,000.  Estate and gift tax planning is also complicated by the scheduled expiration of the Bush tax cuts.

Traditional year-end tax planning would include accelerating deductions and deferring income.  However, the prospect of increased 2013 income tax rates will require taxpayers to think differently.  Many taxpayers will be better off accelerating income into 2012 to avoid higher rates in the future and deferring deductions to get more benefit under the higher rates.  Selling appreciated assets, such as stocks, rental properties, and second homes, in 2012 will lock in the tax on the gains at the 15% top rate.  If you’re planning a Roth IRA conversion, doing it in 2012 may be advantageous.  Demand for tax-exempt bonds is likely to pick up since interest on them is exempt from the new surtax and doesn’t affect the bond owner’s adjusted gross income.

The looming fiscal cliff leaves a level of uncertainty regarding 2013 income tax rates and any tax planning should only be implemented after a full analysis of your specific facts and circumstances.  Meeting with a trusted financial advisor to discuss your situation may be the best investment you could make before the end of 2012.  Consider contacting FORUM Private Client Group at 317.558.6322 or


Not NCUA insured. May involve loss of principal. No credit union guarantee. 

Posted: 12/27/2012 with 0 comments

Categories: Taxes

Blog post currently doesn't have any comments.
 Security code