Planning for “Permanent” Tax Laws

The American Taxpayer Relief Act of 2012 (ATRA) was signed into law earlier this year. Many provisions of this tax law are permanent, or at least they’ll be permanent until they’re changed. Thus, they have no “sunset” date, so you can plan with some normalcy as we near the end of 2013.
ATRA’s main provisions cover both income and estate taxes. On the income tax side, the law—along with provisions of health insurance legislation that took effect in 2013—widened the gap between taxpayers deemed to have high incomes and those with lower incomes. Speaking generally, taxpayers with annual income over $200,000 may have to be concerned with higher tax rates, additional taxes, and phaseouts of tax benefits. Taxpayers with lower incomes will continue to enjoy relatively low rates. Therefore, year-end tax planning should include efforts to reduce gross income, for high bracket taxpayers, while perhaps recognizing taxable income in low brackets.
In terms of estate tax, ATRA relieves most individuals and families from concerns about federal estate tax. However, residents of states with state estate tax still can engage in tax planning. Moreover, some traditional estate planning strategies can offer income tax savings now and in the future.