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2013 is rolling along; are you doing everything you can to improve your tax situation?

By Laura Reinde
Rehmann – BWD

Play the long game.

If you’re used to making your financial plans in 12-month increments, get used to taking a little longer view of things. Rehmann’s Chief Investment Officer, Jeffrey Phillips, says that doing a twoyear tax projection may be more helpful. When paying your winter property tax bill, check to see if paying this year versus next year is more advantageous. Also consider whether additional deductions (such as accelerating charitable contributions) could have a bigger impact on your marginal tax bracket in 2013 versus 2014.

Be flexible.
A flurry of rate changes took effect on the first of the year, including those on income and estate tax; get ready to roll with the punches. Load up on 401(k) contributions because of the possible tax rate effects and use nonqualified deferred compensation if you’re maxing out your 401(k).*

Familiarize yourself with the increased capital gains tax rate.
A capital gain occurs when a capital asset is sold or exchanged at a price higher than its basis. Rehmann Principal Bryan Pukoff reminds us that no tax is currently paid by those in the lower tax brackets (10 and 15 percent) on most long-term capital gains, while investors in the higher tax brackets previously faced a 15-percent tax rate. While those who are currently paying no tax on capital gains will continue to experience that tax rate, the rate will increase from 15 to 20 percent for many others.

Consider your options.
While the estate tax exemptions remain unchanged, the tax rate on estates has increased. If your taxable estate is valued over $5 million, Phillips suggests revisiting the liquidity levels in your estate to address the potentially higher tax rates. These individuals may want to move their existing insurance into an irrevocable trust or purchase additional insurance to address the increase.

Pay it forward.
Individuals over 70 1/2 years old can direct up to $100,000 of qualified charitable distributions (QCD from their IRA to a charitable organization through the end of 2013. In order to make a QCD,
ask your advisor to make a distribution directly from your IRA to a qualified 501(c)3 charity. If you file a joint return, your spouse may also exclude up to $100,000 in QCDs.

Change can be intimidating — especially when there’s money involved — but taking the time to prepare now can help you meet the changes with confidence and help make 2013 the year of you.


BWD Magazine
Friday, 29 March 2013
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