Start Next Year’s Tax Planning NOW!

It’s not too early to start tax planning for 2013.

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It’s not too early to start tax planning for 2013. The 2012 tax filing season is over for nearly all of us. Even those who filed an extension will probably be taking the next few months off, because they now have until October 15th to file. However, to minimize your taxes for 2013, it might help to start planning your tax strategy now… especially when it comes to avoiding tax mistakes.

One of the most common mistakes made by investors is selling an investment too soon and realizing a short-term gain instead of a long-term gain. Whenever possible, hold an investment for at least 12 months to minimize taxes. The capital gains rate depends on how long the investment is held, and the difference is significant.

Long-term capital gains are taxed at 0% for taxpayers in the 10% or 15% tax bracket. Realizing a $10,000 long-term capital gain costs nothing. Unfortunately, if this taxpayer sold the same investment before the one year mark, their tax bill could be $1,500.

A capital gains rate of 15% applies to long-term capital gains for taxpayers in the 25%, 28%, 33%, or 35% tax brackets. A $10,000 gain would cost $1,500 in taxes if held long-term, but the tax bill jumps to as much as $3,500 for not waiting 12 months to sell.

The American Taxpayer Relief Act of 2012 added a new tax bracket in 2013 and a new rate for long term capital gains. Single taxpayers with taxable income greater than $400,000 are subject to the 39.6% ordinary income tax rate and a long-term capital gains rate of 20%. Joint filers reach the same tax rates when their taxable income exceeds $450,000. The tax rate on a short-term gain is nearly double that of a long-term gain for a taxpayer in this tax bracket.

The bottom line – if you want to minimize your tax bill in 2013, it often pays to be patient.

Will Your Money Last Through Retirement?

No one wants to run out of money. But without goals and a solid plan,
how can you know for sure whether you’re on the right track?

Will I be able to maintain my current lifestyle?

What will my monthly income be in retirement?

Can I protect my hard-earned savings and still
have the income I want?

Rodgers & Associates answers questions like these every day.

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2025 Lititz Pike, Lancaster, PA 17601
Phone: 717-560-3800, Toll-Free: 888-876-3437