A Taxing Time for 2013 Preparation

Year-end tax planning for 2012 is more difficult than in the past few years because of the uncertainty with the tax laws after December 31, 2012. Many of the reduced tax rates and expanded exemptions will expire at the end of this year and tax rates will rise for 2013, absent Congressional intervention. Additionally, many of the tax provisions in the new healthcare law will begin in 2013. While there is much speculation and pontification as to Congressional action before year-end, planning should be contemplated based on the current landscape.

Timing of deductions and income. The usual tax planning advice is to defer income and accelerate deductions, with the idea that paying tax in the future is always better than paying tax today. However, with the tax rates set to increase in 2013, this year may be the opposite for self-employed individuals and owners of pass-through entities (partnerships, LLCs and S corporations). By increasing income in 2012, you may actually pay less tax than if you deferred the income into 2013.

Click here to read the full article which appeared in Columbia Business Monthly.