End of Year Tax Planning

Its already October, which means that time is quickly running out for you to minimize your 2013 tax liability.  While there are a number of tax-saving strategies that can be employed before year end, after December 31st the only viable way to reduce your tax liability would be to make a contribution to a qualified retirement plan (Plan For Your Retirement; What is an IRA?).

End of year tax planning is more important this year than it has been in a long time.  Here is why:

• Tax rates have gone up for high-income earners.  Single individuals making more than $400,000 per year and married couples (filing jointly) making more than $450,000 per year will have to be a top federal tax rate of 39.6%.
• Those same individuals will now be paying a 20% federal capital gains rate on qualified dividends and long-term capital gains.
• Single individuals making more than $200,000 per year and married couples (filing jointly) making more than $250,000 per year will be subjected to the 3.8% Medicare Surtax on net investment income.
• In addition to all this, California has raised its top tax rate to 12.3%, plus a 1% surtax on taxable income above $1,000,000.

There are ways to minimize the impact that these additional taxes will have on you!

The first thing you need to do is talk to a CPA.  There is plenty of advice you can find online about how to reduce your taxes, but this is not a "one size fits all" issue.  You are a unique individual with a unique financial situation.  What may work for Joe down the street may not be the ideal tax-minimization strategy for you.

Here is what a CPA can do for you:

1. Explain the New Tax Laws.  The Medicare Surtax is a brand new tax that operates in a different manner than the income taxes that you are used to.  A CPA can explain exactly how it works in a way that will make sense to you.
2. Prepare a Tax Projection.  A tax projection will allow you to see what your tax situation will be if you do not employ a new tax-minimization strategy. This will allow your CPA to identify what issues affect your tax situation and begin to develop a strategy to minimize your taxes.
3. Develop a Personalized Tax-Minimization Strategy.  A CPA will work with you to determine the best way to reduce your taxes in a way that best fits your life and desires.

If you have any questions, or would like to talk to me about your end-of-year tax planning, please do not hesitate to send me an e-mail.

As always, I appreciate you leaving any feedback you have below.