Welcome back. We hope you enjoyed Part 1 of our 2 Part series. With the new tax codes and changes in place there are quite a few things that will be different this year and we want you, our valued readers, to not get run over by them financially. We’ve got a few more excellent Tips for you in Part 2 and, without further ado, let’s get right to them.
Those people that make over $200,000 as single filers or couples that make over $250,000 jointly need to consider 2 things in 2013; where there money is coming from and how they claim it. In 2013 dividend payouts, rental property income, capital gains and interest payments all will be subject to an increase of 3.8%. If this means you the 1st thing you should do is refer to Section 469 of the tax code to see if you pass the material participation test. If you pass it then you’ll need to restructure many of your income streamsthat involve all of the items mentioned above. A good suggestion would be to increase your retirement plan payments as well as making sure that your rental property income satisfies the ‘participation criteria’ of the IRS by becoming more deeply involved in their interests.
The return of the personal exemption phase out (PEP) means that, for people making over $250,000 single or $300,00 joint there’s a very real possibility of losing up to 80% of your itemized deductions in 2013. One of the best ways to avoid this is going to be by deferring as many deductions and as much income as you can to 2014. This will help you keep the 15% capital gains and qualified dividends tax rate, especially if you’re income exceeds $400,000.
Finally, an excellent way to avoid a big hit on taxes at the end of 2013 is to invest in your business this year. Any new equipment and machinery purchased this year (and put into service this year also) will qualify for the 1st year 50% depreciation allowance. Even more importantly, since it actually expired there’s no guarantee that this deduction will be available in 2014 and most experts believe that it won’t. If you’re going to do it anyway 2013 is definitely the year to invest in your biz.
And there you have them. A gaggle of new Tax Tips for 2013 that will help you hold onto more of your money and pay less in taxes. We hope that you enjoyed this and we invite you to come back for more excellent financial advice soon.