Although there are no major taxes taking effect in the 2012 presidential year, several pending changes in 2013 require taxpayers to start their 2012 tax planning as soon as possible.

The following are just a few critical changes taxpayers need to consider in their 2012 tax planning:

• The American Opportunity Tax Credit expires in 2012. Since lawmakers are looking for ways to cut the federal deficit, this credit will likely be allowed to expire. 2012 may be the final year for taxpayers to receive a credit for eligible education expenses.
• If lawmakers don’t act on the ordinary income tax brackets, the highest tax rate will increase from 35% to 39.6% in 2013. Taxpayers in the top tax bracket might want to accelerate income into 2012 to pay the lower rate.
• Higher-income earners will be subject to a new 3.8% Medicare tax on profits from the sale of investment property. Individual taxpayers with gross income > $200,000 ($250,000 for married couples filing jointly) will pay this new tax. Taxpayers with capital gain, dividend, interest, or net rental income need to consider this new tax when managing their investments.
• If lawmakers don’t act on the estate exclusion, the current $5 million estate exclusion will fall to $1 million on January 1, 2013. Taxes on those $1 million estates will be 55%. Taxpayers with estate values between $1 million and $5 million should reevaluate their estate planning based on the new exclusions limit.

Tax planning should be a year round activity, especially for those who are higher-income earners or taxpayers with primarily investment income. Having a tax professional who follows the changing tax environment is critical for taxpayers looking to minimize their tax consequences.

Don’t wait another day; contact Flexible Accounting Services of the Triangle today for a free tax review and consultation.