Tax Planning During a Time of Uncertainty

If Congress fails to act, the Bush tax cuts will expire on January 1, 2013. Even in these uncertain tax times, taxpayers can still take steps to reduce their current tax bill and prepare for 2013 and beyond. Five steps taxpayers can take to reduce their tax bills and prepare for any future tax changes are below:

1. Taxpayers should consider accelerating deductions into the current tax year and defering income until the next year. However, it is important to keep in mind that AMT planning typically requires help from a tax expert.
2. For 2011 and 2012, taxpayers should consider funding retirement plans to the max. Doing so will reduce current taxes and will take advantage of the current contribution limit in the event it changes in the future.
3. Taxpayers can have retirement accounts grow tax free by taking assets out of a pretax IRA and converting it to a Roth.
4. Transferring assets now is another option taxpayers have to reduce the affects of any possible decrease in gift and estate tax deductions. Currenlty, taxpayers can gift up to $13,000 a year to as many recipients as desired.
5. Taxpayers can also donate publicly traded appreciated securities to charities. The taxpayer can deduct the full fair market value of the securities at the time of the gift and he does not have to recognize the appreciation as income.

For more information on any of these tax planning tips, see Deborah L. Jacobs, Yearend Tax Planning In Uncertain Times, Forbes, Dec. 19, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.