By Susan Drislane, CPA
Teal, Becker & Chiaramonte, CPAs
There are several tax cuts set to expire at the end of this year. All of which could impact the economy and your wallet. As most people know, many of current temporary tax provisions were originally passed back in 2001 and 2003 under President Bush (via the “Economic Growth and Tax Relief Reconciliation Act of 2001” and the “Jobs and Growth Tax Relief Reconciliation Act of 2003”). These favorable tax rates were previously set to increase at the end of 2010 but were ultimately extended for two years as part of the “Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act.” That extension brought us to the current tax year, but here we are in the last quarter of 2012 and many people are wondering what is on the horizon.
As such, tax advisors have been busy answering questions such as “What tax issues are at stake, and when do they expire?” and “What is the effect of inaction? What is the outlook?” and of course the biggest concern, “How do I plan?”
While there aren’t answers for all of these questions right now, you should know that the following tax rates will automatically increase unless extended by Congress:
So-called “Bush” income tax rates
Capital gains rates
Qualifying dividend rates
Estate and gift tax rates and exclusions
In addition, there are several other tax policies set to expire or take effect in 2013. Those include:
American Opportunity Tax Credit expires
Child Tax Credit reduced from $1,000 to $500 per child
Reduction in marriage penalty expires
Alternative Minimum Tax patch expired in 2011
Estate tax increase
Capital expenditure incentives reduced
New health care taxes take effect
Other items of short duration, known in tax parlance as “extenders”
While we wait to hear the final results for the 2013 tax rates, it’s always good to have as much information on hand as possible because being ready for any possible tax changes early can save you the headache of dealing with it later.