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Give Yourself the Gift of Tax Planning

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November 21, 2013 | Legal Alert
Renee C. Vidal, Steven S. Poulathas

As the leaves turn golden, most of us are thinking about football and the approaching holiday season. The last few months of the year are a prime time for putting planning strategies into place to reduce tax liabilities, perhaps one of the nicest gifts you can give yourself.

High Income Earners

High income earners—large wage earners, pass-through business owners or investors—need to be aware and wary of a number of changes to the tax law in 2013.

High income earners can expect higher tax bills for 2013 as a result of new taxes, deduction phase-outs and a slew of varying income thresholds to track tax changes. These include:

High income individuals can potentially reduce taxable income by controlling the timing of income and expense recognition and holding investments to ensure long-term gain treatment. In some circumstances, it is possible to exchange assets through tax-free transactions that defer taxable income to future years.

Current year opportunities and planning include:

Business Taxation      

While the playing field keeps shifting, there are several tax savings ideas that business owners should be aware of, including expiring tax incentives and opportunities to defer or minimize taxable income recognition.

Estate and Gifting Opportunities

Taxpayers with federal taxable estates can leverage the $5,250,000 applicable exclusion amount (AEA), using trusts or family partnerships/LLCs to effectively transfer wealth from one generation to the next. This exclusion was made permanent by the American Taxpayer Relief Act of 2012 with adjustments for inflation. Other opportunities for tax reductions and wealth transfer include:

Taxpayers in Pennsylvania or New Jersey who do not have a federal taxable estate still face significant state estate/inheritance taxes. In many cases, strategies used for larger estates can be used to reduce or eliminate state estate/inheritance tax liability.

Attention should also be paid to strategies to reduce the income tax consequences of estate plans.

Conclusion

The end of the year is a great time to assess your financial health and implement strategies to limit or minimize your tax exposure. You should consult a tax professional to explore and implement tax strategies prior to year end. If you have any questions or would like more information on the issues discussed in this article, please contact Shareholders, Renee Vidal or Steve Poulathas.

Renee C. Vidal is a tax and estate planning shareholder at Flaster/Greenberg PC in Cherry Hill, NJ. She can be reached at renee.vidal@flastergreenberg.com or 856.382.2250.

Steven S. Poulathas is a business and tax shareholder at Flaster/Greenberg PC in Cherry Hill, NJ. He can be reached at steven.poulathas@flastergreenberg.com or 856.382.2255.

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