Congress reached a deal on the ‘fiscal cliff’ at the last minute (as usual) and the resulting American Taxpayer Relief Program (ATRA) is a deal that will impact not only the wealthiest among us but also the middle income folks who make up the majority of this great nation.
With that in mind we’ve put together a 2-Part Blog series on how to Minimize your Exposure to the new tax laws so that you can keep more of your hard-earned money where it belongs, which is in your bank account. So, if you’re ready to find out how to keep Uncle Sam away from your hard-earned cash in 2013 let’s get started.
The payroll tax cut expired in 2012, reducing your paycheck by 2% and increasing the amount of taxes that you’re going to owe this year. Keep that in mind if you pay your taxes quarterly, especially if you’re used to getting a big return. Estimating your updated tax withholding payments accurately will keep you from getting a big surprise next year. The IRS offers a tax calculator here.
Keep a close eye on your medical spending in 2013. If you want to take a deduction for medical expenses in 2013 they will need to exceed 10% of your adjusted gross income. If you’re over 65 you can use a threshold of 7.5 however. If you want to be able to maximize your deduction it would be a good idea to group your medical expenditures so that they all happen in the same year. Also, if there is a flexible spending account where you work the limit is $2500.00 in 2013 so use as much of it as you can to pay for medical costs that are not reimbursed under your plan.
If you think you can’t put more money towards your retirement think again. The fact is, if you don’t put it away for later it’s going to go to pay taxes now. For those of us in the upper tax brackets one of the best ways to hold onto more money is to use employer sponsored retirement plans which will cut your tax exposure to the net investment income tax. The more you put towards any retirement plan the more you reduce your AGI and your taxes.
Hopefully these Tips have been a help. Please come back soon for Part 2 and some more excellent Tips for keeping more of your money in 2013 by minimizing your 2013 tax hike exposure. See you soon!