Tax Moves Boomers Should Make Now

[zedd]

A smart strategy is to plan around capital gains and losses to reduce your tax bill. Depending on your filing status and income, it could make sense to harvest gains in 2013, especially if you expect a higher tax rate in the future. Individuals can use losses to offset both short and long-term gains.
Another tip is to convert to a Roth IRA--this will help future tax planning. Roth IRA withdrawals are tax-free, and there are no required minimum distributions. However, note that you will have to pay the tax on the conversion now, so only convert if you have losses or deductions from previous years.
Don’t wait until the last minute to make tax planning decisions. You have until Dec. 31 to take steps to reduce your tax bill in 2013.

Boomer: What tax provisions are set to disappear at the end of the 2013 year?
Willey: When Congress passed the extender bill last year, it made some of the more critical changes permanent, such as the estate tax changes and the AMT patch. This has taken some of the pressure off passing an extender package this year because there is not the overwhelming outcry from the public.
Knowing how well Washington is working nowadays, I am concerned that many of these issues will not be addressed. Some of the more important provisions that are set to expire at the end of 2013 are the following:

• Sales and use tax deduction instead of state income tax deduction
• Deduction for higher education tuition expenses up to $4,000
• Tax free IRA distribution to a charity of up to $100,000 for those who are at least 70.5 years old
• Deductibility for mortgage insurance premiums
• Direct expensing of assets (Sec 179 deduction)-reduced from $500,000 to $25,000
• Bonus depreciation deduction
• 15 year depreciation on qualified lease and restaurant and retail property
• A number of energy incentives and credits
• Health coverage tax credit

And of special concern for those on Medicare :

Another unforeseen issue may arise for seniors on Medicare. A bump in income (one-time capital gains) can increase their Medicare premium substantially for the following year because the premium is based on adjusted gross income. It often comes as a surprise because it does not show up on the tax return, but it is billed as an increased premium paid throughout the following year.

So if you are on Medicare , be aware of the fact that exercising the suggestion in the first quote might cause your medicare premiums to be raised. See the link below for a discussion of medicare premiums.

references:
Tax Moves Boomers Should Make Now | Fox Business

Part B costs | Medicare.gov

 

[audreyh1]

Thanks zedd - that is an excellent summary tailored for this group.

We decided it made sense to itemize this year, and the "Sales and use tax deduction" will definitely help. Some articles suggest that it will return. Congress would have until the end of next year to reinstate it for 2014 and later, but at least it was extended one more year (2013).

We went ahead and realized some losses in one fund that I was planning to trim early next year anyway - pulled it into this tax year.