The only part that reflects certainty for the year 2013 is that wealthy tax payers will pay more taxes and face a more complicated tax regime than before. With the many tax provisions that had expired last 2012 such as research credit for businesses, above the line deduction for qualified tuition expenses, generous bonus depreciation allowances, expensing allowances for business and many more, it obviously would call for an in depth tax planning now because of the prospect of higher taxes in the coming months. In connection, here is a list of considerations,in tax planning for 2013 that could be a great help in this critical time. This list is very helpful in my own opinion since it is already explained simply especially to those without much background knowledge in taxation. I hope this will serve as something of value. Enjoy.

 

• Increase your FSA. Set aside more for next year in your employer’s health flexible spending account (FSA). Next year, the maximum contribution to a health FSA is $2,500. Remember – you will no longer be able to set aside amounts to get tax-free reimbursements for over-the-counter drugs, such as aspirin and antacids.
• Make HSA contributions. If you became eligible to make health savings account (HSA) contributions late this year (even in December), you can make a full year’s worth of deductible HSA contributions even if you were not eligible to make HSA contributions for the entire year.
• Realize losses on stock while preserving your investments. There are several ways this can be done. For example, you can sell the original holding then buy back the same securities at least 31 days later.
• Sell assets before year-end. If you are thinking of selling assets that are likely to yield large gains, such as inherited, valuable stock, or a vacation home in a desirable resort area, make the sale before year-end while still paying attention to the market.
• Sell and repurchase stock. You may own appreciated-in-value stock and want to lock in a 15% tax rate on the gain, but you think the stock still has plenty of room to grow. In this situation, consider selling the stock and then repurchasing it. You’ll pay a maximum tax of 15% on long-term gain from the stock you sell. You also will wind up with a higher basis (cost, for tax purposes) in the repurchased stock.
• Make contributions to Roth IRAs. Roth IRA payouts are tax-free and immune from the threat of higher tax rates, as long as they are made after a five-year period, and on or attaining age 59-½, after death or disability, or for a first-time home purchase.
• Convert traditional IRAs to Roth IRAs. This will help you avoid a possible hike in tax rates next year. Also, although a 2013 conversion won’t be hit by the 3.8% tax on unearned income, it could trigger that tax on your non-IRA gains, interest, and dividends. Conversions, however, should be approached with caution because they will increase your adjusted gross income [AGI] for 2012.
• Take required minimum distributions from retirement plans. This is applicable if you have reached age 70-½. Failure to take a required withdrawal can result in a penalty equal to 50% of the amount of the RMD not withdrawn. If you turn age 70-½ this year, you can delay the first required distribution to 2013, but if you do, you will have to take a double distribution in 2013—the amount required for 2012 plus the amount required for 2013. Think twice before doing this.
• Deduct your medical expenses. This year, unreimbursed medical expenses are deductible to the extent they exceed 7.5% of your AGI, but in 2013, for individuals under age 65, these expenses will be deductible only to the extent they exceed 10% of AGI.
• Shelter gifts. Make gifts sheltered by the annual gift tax exclusion before the end of the year to save gift and estate taxes. You can give $14,000 in 2013 to each of an unlimited number of individuals but you can’t carry over unused exclusions from one year to the next.