In the News: Now is the Time to Lower your 2012 Tax Bill
Fall, or autumn if you’re a season snob, is a busy time of year at the AICPA. Earlier this week, we held our Fall 2012 Governing Council Meeting – but you know that already because we’ve covered all the news earlier in the week. In addition to The World Series and beautiful foliage, fall is also the time to get proactive and take steps to lower your 2012 tax rate if you haven’t already done so.
This year, it is particularly important for taxpayers to pay close attention to the planning process with the uncertainty surrounding the potential expiration of the Bush tax cuts and many widely-used tax cuts which have not yet been renewed for the 2012 tax year . Susan B. Garland spoke to Melissa Labant,director of taxation at the AICPAabout this issue for a recent article in Kiplinger's Retirement Report focused on this issue.
The article calls attention to the fact that one of the biggest changes on the books for 2013 is a 3.8% surtax on investment income for singles with a modified Adjusted Gross Income of more than $200,000 ($250,000 for married couples). The tax applies to the smaller of net investment income or the amount by which taxable income exceeds the thresholds.
Labant suggests that certain investors could consider increasing the amount they have invested in municipal bonds, which are exempt from the surtax. "I would not invest in municipal bonds simply to avoid the 3.8% tax," she said. "But a lot of people have not invested sufficiently in fixed income as they prepare to retire, and taxes are an added reason to be invested in municipal bonds."
The article also includes planning tips on charitable giving, IRAs and healthcare expenses.
While proactive tax planning may help you lower your overall tax burden, understanding which taxes you pay is just as important. As The Ledger reported earlier this week, the AICPA unveiled a tool earlier this year which calculates estimated federal, state and local tax obligations, and also provides insight on how much is being paid annually in taxes that generally are not documented in individual tax returns. The Total Tax Insights™ calculator is a free online tool that may change the way you think about your taxes.
The article notes that, one of the main goals of the calculator is to promote tax education and understanding. The calculator website also features a glossary of tax-related terms and links to information on the different taxes represented. The calculator factors in more than 20 taxes at the federal, state and local levels for more than 3,000 U.S. counties. It is important to know that while all taxes are not represented in the calculator and the amounts generated are estimates, it is an effective tool to get a sense of how much you are paying, which is invaluable as you do your year-end tax planning.
Tax planning image via Shutterstock.