Your Bank > Education and Advice > CNB University

Year-end Tax Planning Opportunities

R Green 2014
Ramona Green, CTFA
Vice President, Trust Officer
[email protected]
(585) 419-0670 x50616

Time may be running out to take advantage of favorable tax rates. In 2013, income-, gift-, and estate-tax rates are scheduled to increase under current law. Here are some tax planning opportunities you may want to consider this year.

Make Tax-free Gifts

In 2012, you can still give up to $13,000 worth of property per recipient to an unlimited number of individuals without the gift being considered taxable for federal gift-tax purposes or using any of your $5.12 million gift- and estate-tax exclusion amount. Unless new legislation is enacted, gift- and estate-tax laws are scheduled to change in 2013. Starting next year, the highest tax rate for gifts and estates will be 55% and the exclusion amount reverts to $1 million.

Recognize Capital Gains

Under current law, qualified dividends and most long-term capital gains are taxed at a maximum rate of 15%. For individuals in the two lowest income-tax brackets, qualified dividends and capital gains are tax free in 2012. You may want to look for opportunities to lock in unrealized capital gains in 2012 by selling appreciated investments that you’ve held for more than one year. If you have capital losses, you can use those losses to offset capital gains on other transactions plus an additional $3,000 of ordinary income ($1,500 if married filing separately) annually.

In 2013, ordinary income-tax rates are scheduled to increase from the 2012 rate of 35% to the top marginal bracket of 39.6%. Dividends will be taxed at ordinary income-tax rates instead of at capital gains rates; and long-term capital gains rates are scheduled to increase from 15% to 20%. In addition, a new 3.8% Medicare tax on investment income for upper income taxpayers is set to begin in 2013.

Take Full Advantage of Retirement Savings Plans

Saving as much as possible in a tax-deferred retirement savings plan may reduce your overall current income-tax liability and potentially boost the amount you’re able to accumulate for retirement. If you qualify, also consider saving in a Roth IRA since qualified distributions will be income-tax free.

Contact us at 585-419-0670 with any questions you may have.

This material is provided for general information purposes only. Investments and insurance products are not FDIC insured, not bank deposits, not obligations of, or guaranteed by Canandaigua National Bank & Trust or any of its affiliates. Investments are subject to investment risks, including possible loss of principal amount invested. Past performance is not indicative of future investment results. Before making any investment decision, please consult your legal, tax or financial advisor. Investments and services may be offered through affiliate companies.