Having a Plan Ready Can Help as Codes Change

Author: Keith Huggett

Unless Congress passes a new law and gets it signed, the tax code will change significantly on Jan. 1, 2013. Given that this is an election year, odds are that little or nothing will get done before taxes go up. Furthermore, depending on how the elections go, the tax cuts could very well not get renewed. With this in mind, here are a few pieces of tax strategy that you can implement today to take advantage of this year's favorable rates and keep your tax bill down:

• Take advantage of the $5 million gift credit. This year, the first $5 million of your estate are tax free. However, you can also opt to not die and gift up to $5 million without incurring any estate or gift tax. Take advantage of this by gifting money to your heirs this year while it is tax free, instead of waiting to pass it on through a will when you pass away.

• Pay your capital gains taxes. If you have appreciated stock that you are looking to turn into cash, selling it before the end of the year will lock in this year's low capital gains taxes. On the other hand, it is always a good idea to donate highly appreciated stock since you can write off its current market value without ever having to pay the capital gains tax on any profit that you made.

• Convert traditional IRAs to Roth IRAs. This tax strategy lets you take advantage of this year's low taxes, to take your IRA funds and put them into a Roth account where any future growth will be completely tax-free. In the long run, this can save you a great deal of money.

Implementing a tax strategy takes professional help. The experienced professionals at The Tax Office Inc. can help you find a strategy that works for your personal taxes and for your business' account. Contact us today to learn more.