Guest article by Andrew Mark, CPA
At the beginning of the year, as part of the federal government’s “fiscal cliff” negotiations, capital gain rates for higher income taxpayers (those with taxable incomes more than $400,000 ($450,000 if married) increased by 5 percent. Taxpayers with incomes more than $250,000 ($300,000 if married) also had their exemptions and deductions cut. So it is quite possible that higher income taxpayers with substantial investment income will see a tax increase of 10 percent more for 2013 than in 2012.
If you are in this category, speak with your investment advisor about year-end strategies that may help reduce your tax burden.
Looking ahead, a number of provisions that were also part of the fiscal cliff deal are set to expire at the end of this tax year. This will set up some unknowns starting in January. A few expiring provisions you may want to be aware of as you embark on the new year include:
- The $250 deduction for teacher classroom expenses;
- Excluding income on debt cancellation for foreclosure/short sale of a principal residence;
- Mortgage insurance premiums deduction;
- The election to claim an itemized deduction for state and local sales tax; and
- The rule allowing tax-free IRA distributions (for taxpayers over age 70½) of up to $100,000 if donated to charity.
Andrew Mark is a Certified Public Accountant in private practice and a board member of the National Association of Tax Professionals Arizona Chapter. Visit his website at http://ajmarkcpa.com/ to learn more about his income tax preparation services.