As the dust settles from the fiscal cliff deal, this is a good time to re-evaluate your tax situation and investment portfolio.
This post comes from Roger Wohlner at partner site U.S. News & World Report.
It’s 2013. The world did not end in December, and our "leaders" in Washington seem to have averted the fiscal cliff, at least for now. Against this backdrop, there are a number of financial planning opportunities for this new year.
Some opportunities born out of the bill passed by the House and the Senate:
Three years of $1,000 contributions could grow to $89,000 or more by retirement. Plus, starting an IRA will teach your child valuable lessons.
This post is by Bill Bischoff of SmartMoney.
Working at a tender age is an American tradition. I'm sure lots of kids did just that over the summer, and some are still be doing it after school and over the weekends. What isn't so traditional is the notion of kids contributing to their own Roth IRAs. It should be a tradition, because it's such a good idea.
All that's required to make a Roth contribution is having some earned income for the year. Age is completely irrelevant. So if your child earns some cash from a summer job, or part-time work after school -- or whatever really -- the kid is entitled to make a Roth contribution.
For the 2012 tax year, your child can contribute the lesser of: (1) earned income or (2) $5,000. These contribution limits apply equally to Roth IRAs and traditional IRAs, but the Roth alternative is the way kids should go in most cases -- for reasons I'll explain.
Taxing the value of employer-sponsored health insurance could raise $150 billion in 2013.
This post is by Ricardo Alonso-Zaldivar of The Associated Press.
New taxes are coming Jan. 1 to help finance President Barack Obama's health care overhaul. Most people may not notice. But they will pay attention if Congress decides to start taxing employer-sponsored health insurance, one option in play if lawmakers can ever agree on a budget deal to reduce federal deficits.
The tax hikes already on the books, taking effect in 2013, fall mainly on people who make lots of money and on the health care industry. But about half of Americans benefit from the tax-free status of employer health insurance. Workers pay no income or payroll taxes on what their employer contributes for health insurance, and in most cases on their own share of premiums as well.
It's the single biggest tax break the government allows, outstripping the mortgage interest deduction, the deduction for charitable giving and other better-known benefits. If the value of job-based health insurance were taxed like regular income, it would raise nearly $150 billion in 2013, according to congressional estimates. By comparison, wiping away the mortgage interest deduction would bring in only about $90 billion.
Looming changes in the estate tax and gift tax are keeping tax experts busy. But it's hard to make decisions without knowing what measures will be adopted.
This post is by Laura Saunders of The Wall Street Journal.
Many people waited until after the election to decide to give, says Diana Zeydel, an estate lawyer at Greenberg Traurig in Miami. "Now they're concerned the window of opportunity is closing, and we're working till 11:30 or midnight every day, including weekends," she says.
Stacy Singer, an estate expert at Northern Trust in Chicago, says the firm has reviewed 500 new trusts since October, more than double the typical number. "Most appraisers stopped taking new business in early November," she says.
A number of measures that cut taxes for individuals and businesses have already ended this year. Those include relief from the AMT and sales tax deductions.
This post is by The Associated Press.
While much of Washington is consumed by the debate over tax cuts scheduled to expire next year, a big package of tax breaks already expired this year.
Among the biggest, along with the cost to retroactively extend each one for 2012 and 2013:
The deduction rate for business travel will rise to 56 cents a mile, and the rate for medical travel and moving will rise to 24 cents. The charity rate will not rise.
This post is by Kay Bell at Bankrate.com.
I carefully note every mile I travel for a business meeting or other professional task so, like all my self-employed colleagues, I can deduct them on my tax return. But salaried workers also can deduct mileage if they travel for their jobs and aren't reimbursed by their employers.
It's not a huge deduction, but when you're scraping for any tax savings, every little bit helps.
And the Internal Revenue Service is making our possible tax savings a tiny bit larger in 2013, thanks to a penny increase in the standard mileage deduction amounts for travel connected to business and medical treatments, as well as for moving.
The threshold for deducting medical expenses from your taxes is rising to 10% of income. Should you accelerate some payments?
This post is by Carolyn T. Geer of The Wall Street Journal.
The squeeze is on for folks who rely on the tax code for relief from big medical bills. Starting next year, taxpayers will only be able to deduct medical expenses that exceed 10% of their adjusted gross income.
For years, that threshold has stood at an already formidable 7.5% of income. (People age 65 and older can keep using the old threshold through 2016.) The change affects taxpayers who itemize deductions on Schedule A of the 1040 form instead of taking the standard deduction.
At the same time, contributions to flexible spending accounts — which help cover out-of-pocket medical costs on a pre-tax basis — will be capped by law at $2,500 per year (adjusted for inflation going forward). Previously, employers decided how much employees could contribute to these accounts.
The top tax rate, estate taxes and capital-gains rates are points of contention. Plans also disagree on spending cuts and the debt limit.
This post is by The Associated Press.
There are several competing plans to avoid the "fiscal cliff," a one-two combination of tax increases and automatic spending cuts.
The GOP-controlled House is scheduled to vote on Thursday on House Speaker John Boehner's scaled-back "Plan B" tax proposal exempting people earning less than $1 million a year from tax increases. Boehner and President Barack Obama have also exchanged offers in their ongoing talks.
Here are some of the highlights of the three competing plans.
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