Last week we started to breakdown our newsletter into smaller, more digestible snip-bits. I for one having nothing but Turkey, travel plans & skiing on the brain, but as promised here is Part II of our newsletter synopsis. This week we will discuss other sources of income that you may overlook/forget and remind you of some tax breaks that are going bye-bye after this year.
Don’t overlook less obvious income:
By now you have a fairly complete picture of your income for the year from sources such as salary, retirement plan distributions and dividends. The total of these combined with other predictable income items provide a good starting point for tax planning, one you may need to augment by thinking about less obvious additions to income.
Here are a few examples: taxable capital gains distributed by mutual funds. These differ from the gain you recognize when you sell mutual fund shares you own. Capital gain distributions from funds occur when the fund manager makes a profit selling investments the fund owns. Those gains are passed to shareholders and you generally have no control over the timing. The distributed gains are taxable even if you reinvest them in additional shares and in some cases can impact the AMT computation. Check with your mutual fund provider before assuming you’ve captured all your income for 2012.
Another one that is easy to over look is a 2010 Roth conversion. If you opted to spread the tax over two years, you’ll need to include the second half on your 2012 federal income tax return. That will increase your income which can affect your marginal tax bracket, taxable social security benefits and how much of your rental real estate activity losses are deductible. In additional your estimated tax payments or withholding may need to be adjusted.
Utilize expiring tax breaks:
One that expires December 2012 is Bonus Depreciation which lets you write off 50% of the cost of assets purchased in your business. You will want to review your asset acquisition schedule to determine if buying new equipment this year will garner a larger tax benefit versus waiting until 2013. (We discussed this topic in our blogs; Buying office equipment & Buying/Selling your Vehicle)
Next week we will continue to breakdown the newsletter and will discuss common 2012 tax credits that the IRS says are missed. We wish everyone a very safe and Happy Thanksgiving!
Please feel free to contact Harvey and Caldwell, PA at 913-451-4400 or visit our website http://www.harveyandcaldwell.com/ as a resource for your tax needs.
To read this letter/newsletter in its entirety: http://www.planningtips.com/4422/default.asp?tip_id=4422&co_id=18386&pg=1