End of Year Tax Tips – Part 3

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Capital gain tax rates are likely to increase in 2013.  Accepting your taxable gains now, instead of after January 1, 2013, may mean more profit and less taxes.

Capital Gain Tax Rates:

Depending on your tax bracket, some households may be able to seize the opportunity to earn capital gains tax free! However, the question of whether you should liquidate your investments now, instead of in the next year or two, in order to capitalize on lower tax rates, really depends on your short-term needs versus your long-term goals. In regards to investments, taxes should be a secondary consideration, not a primary consideration for investment strategies.

Paying attention to Washington D.C. will be important in these final days of 2012 to ensure that you have the right strategy in place for tax year 2013. These tax tips are very broad and you should consult with a tax attorney, certified public accountant, or other qualified tax professional that is familiar with your individual circumstances before making any tax planning decisions.

End of Year Tax Tips – Part 1

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‘Tis the season for holiday cheer … and last minute tax planning. Bah humbug!  With the tax year about to end, tax season will officially begin; it’s finally the time to ensure that you will not need to hire a tax relief attorney in April 2013.

My usual end of the year advice includes comparing your prior year tax returns with your present year income, tax withholdings, financial transactions, and withdrawals to determine whether you need to make late December moves to ensure you don’t owe a tax debt. This usually includes ensuring that you properly withheld taxes on your income throughout the year and/or made your estimated tax payments, and invested accordingly. While this advice is still sound, as of the date of writing of this article, if things in Washington D.C. remain the same, my advice also includes, earn it now if you can.

Being mindful to not illegally manipulate your income, i.e. you earn your income when you have a right to receive the income; accelerate your income in 2012, if you can. Since your tax rate may increase beginning January 1, 2013, the money you earn now is worth more now than it will be in just a few weeks because your tax rate is likely to increase. Likewise, self-employed individuals who have the ability to time the payment of deductible expenses may want to defer those expenses for tax year 2013, because those expenses will be more valuable in tax year 2013 than in tax year 2012.

Our Next President Shouldn’t Be a Tax Schmuck

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When Mitt Romney announced that he would probably follow tradition by disclosing his tax return sometime in April, he also confirmed that his effective tax rate is around 15%.  Yes, it is low.  Yes, Romney takes full advantage of every opportunity available to him within the Tax Code to pay less taxes.  Isn’t that what anyone would do?  Here is the Tax Girl’s view:

“The thing is, I want my President – no matter who it is – to either know enough about fiscal and tax policy to make smart decisions or to surround himself (or herself) with people who can make those smart decisions. Having someone who consistently makes poor decisions about their own taxes directing tax policy seems like, I don’t know, asking Newt Gingrich for relationship advice.

~ Kelly Phillips Erb, Forbes writer / blogger

I guess the Gingrich comment was added for a little extra spice.  Ouch.