Each year we meet with our clients to review their projected taxes for the year and see what actions can be taken to minimize their tax liability. The usual actions are to defer income to the following year, accelerate deductions into the current year, and take advantage of tax credits. This year, the year-end tax planning process is turning in a different direction.
With the looming expiration of many tax deductions and increase in tax rates that begin in 2013, some clients are considering taking a reverse course by accelerating income and deferring deductions as a plan to minimize taxes. In addition to changes in the income tax code, unless Congress passes new legislation, the estate taxes are dramatically changing in 2013. Until December 31, 2012 each person can make gifts during their lifetime of up to $5,120,000 without incurring a gift tax. Starting in 2013, unless new legislation is passed, the lifetime exemption drops back to $1,000,000. This exemption is in addition to the annual exemption on gifts of $13,000 or less.
As year-end is quickly approaching, now is the time to review how the changing income and estate tax laws will impact you and determine what actions should be taken. If you have questions, please contact your CPA so we can help you with your planning.
Written by Carl Oblad, CPA LinkedIn Profile