The Fiscal Cliff Cometh – Things to Do By 12/31/12
Ben Franklin said that the only two certainties in life were death and taxes. Tax exemptions and rates, however, are subject to change, and unless Congress acts soon, taxes are going up significantly next year.
Here are some things to consider doing right away before 2012 comes to a close:
1. Make gifts to use the $13,000 annual gift tax exclusion.
2. Make gifts to use the $5.12 million gift and estate tax and generation-skipping transfer tax exemptions before it falls to $1 million ($1.4 million for GST) next year.
3. Sell capital assets such as appreciated securities to harvest gains as capital gains rates will be increasing as much as 8.8 percent next year (including the 3.8 percent surtax).
4. Include items in income this year to take advantage of lower rates.
5. In C corporations, distribute dividends this year.
6. Delay deductions until next year since they will be worth more at a higher rate.
7. Make distributions from estates and trusts as beneficiaries may be able to advantage of lower rates in 2012.
Before using any of these techniques, consult with your CPA and tax/estate planning attorney to make sure that it makes sense for your situation and that it is done properly.