Did you adopt the wait-and-see approach to tax planning this summer? With the Supreme Court decision on the health care act removing a level of uncertainty and the end of the year approaching, it’s time to stop waiting and start doing.
Here are three questions to consider.
- How will the increased medical deduction threshold affect me? Beginning in 2013, your unreimbursed medical expenses will have to exceed 10% of your adjusted gross income in order to claim an itemized deduction, unless you’re 65 or over. For your 2012 federal income tax return, the threshold is still 7.5%.
Tip: Consider shifting elective medical expenses into 2012.
- Should I convert my Roth in 2012? Starting January 2013, a 3.8% tax on unearned income such as capital gains, dividends, and interest applies if your modified adjusted gross income (MAGI) is more than $200,000 ($250,000 for married filing jointly). Distributions from Roths do not increase your MAGI – but conversions do.
To do: Calculate your tax exposure before year-end.
- Will the additional Medicare tax on earned income apply to me? The new 0.9% Medicare surtax takes effect in January 2013, and will apply when your compensation and self-employment income exceeds $200,000 ($250,000 when you’re married filing jointly). Your employer is only required to take your wages into consideration when withholding the tax.
Result: Your estimated tax payments or withholding amounts might need to be adjusted next year.
Please call to discuss how the health care law will affect your taxes for 2012 and future years.
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