Taxpayer Relief Act of 2012

ImageOn December 31, 2012, Congress passed the Taxpayer Relief Act of 2012.  Below are some highlights of the law that have the greatest impact on the majority of people:


  • Introduction of a new 39.6% tax bracket for taxable income over $450,000 married filing joint ($400,000 single)
  • Itemized deductions will begin to phase-out by 3% for an adjusted gross income (AGI) over $300,000 married filing joint ($250,000 single)
  • Capital gains and qualified dividends will still be taxed at 0-15% as in prior years – unless you are in the new 39.6% bracket mentioned above, then they will be subject to a 20%  tax.
  • Alternative Minimum Tax (AMT) exemption has been made permanent for 2012 and beyond.
  • The estate tax exemption amount was made permanent at $5 million (plus inflation adjustments from 2011 on) and the top rate was increased to 40%
  • Estate tax portability for spouses was made permanent
  • The American Opportunities Tax Credit was extended till 12/31/2017
  • Distributions from an IRA directly to charity for those age 70.5 or older was extended until 12/31/2013.

If you are interested in reading the entire text of the legislation, click here.

Man’s Best Friend – Roth Conversions

Okay, so maybe my two rescue dogs are my loyal companions, but in the financial planning world, Roth Conversions are “mans best friend.” If done by December 31, you have until October 15, 2013 to determine if it was a good move for you. If you decide your tax situation would have been better if you wouldn’t have converted (or only converted a portion) you have the option to undo all (or a portion) of your conversion. We call it the “undo button.”

Do it now and work with your tax preparer after New Years (perhaps after the resolution of the current tax mess) to see if it was a good move. If tax rates go up, it could be a big win!

P.S. Yes…that is my dog, Twix, in Minnie Mouse ears!


401k Limits – Inflation Adjustment

2013 must be the year of raises…

RP-2012-41 will be published on November 5, 2012, and will contain the full details of the announced changes, but some of the changes are outlined below:

This week the Social Security Administration announced that recipients will receive a 1.7% increase…

And the IRS announced an increase in both the 401k contribution limits and gifting limits.  Starting in 2013, you can now add $17,500 to your 401k (plus and extra $5,500 if you are over 50).  This is a $500 increase in the contribution limit.  In 2013 you will also be able to gift up to $14,000 per year to another individual without having to file a special tax return.  You can read about these increases here…

Hidden Taxes

Are you sick of the political adds yet?  Just think…only a month and a half to go!  Taxes are one of my favorite topics (lame…I know…) and I had to give strong consideration to facts being thrown around by each candidate about their tax plans.  I don’t want to get into a political debate here, but simply want people to wake up and understand how taxes work.

Tax rates are not the only thing to pay attention too!

So many people get caught up on _____ (insert favorite politician) is going to raise/lower taxes on this class of people.  Wake up!  Taxes come from everywhere!

Do you have a Flexible Spending Account (FSA) at work?  Well in 2013 the most you can add to your FSA will be reduced to $2,500…(see article below)

So if last year you put in $5,000 and got a full tax deduction and this year you can only put in $2,500 isn’t that just a way to make you pay more in taxes without raising your actual tax rate.

Have you ever had to pay Alternative Minimum Tax (AMT)?  Don’t know?  HINT: If there is a number on line 45 of your tax return you are paying it.  Again, another way to institute tax policy without upsetting the masses.

Are you or your parents having to pay taxes on your Social Security income?  Another hidden tax!

The list goes on and on…Come on middle-class!  Don’t be fooled into thinking it is just about the tax brackets…

What hidden taxes are you paying?

Inside the Millionaire Mindset

Looking for a bit of optimism in the face of today’s daily drumbeat of negative news? Look no further than Fidelity’s latest survey on the mindset and recent investing moves of some 1,000 millionaire households. While they too see the myriad short-term risks out there for the economy and investors, they are more upbeat on the market outlook a year from now than at any time in the survey’s five-year history.

To read more about their mindset click here.

Thoughts on Greatness (and Happiness)

So you want to be great do you?  I just hired a business coach and she is helping me explore who I am and where I want to be.  I saw this article from Forbes and had to link it to my blog…

My favorite is comfort vs desire for change.  If you are not willing to step outside your comfort zone, then don’t complain if you don’t experience change…

What is your favorite?

College Costs (Why save?)

For those of you who know me, you know that I just had the most beautiful little girl you have ever seen!  You also know that I am very concerned about people getting the best education they can.  So you can understand my shock when I saw this article on about the cost of college in 18 years..