Year-End Tax Planning (Part I)
11/10/2003
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As 2003 is coming to a close, we all need to take informed actions to make next April 15, you guessed it, less taxing.
So, from this week and until the end of the year, we will put out a series of short “tips” for you to consider. The goal is clear and simple: make smart moves before the year-end to maximize your tax savings.
As you may already know, the typical year-end tax planning is to defer income and accelerate deductions. However, with our tax laws becoming ever more complicated year after year, saving taxes over the long term could get much trickier for 2003 and beyond.
For example, with newly enacted 2003 tax law, we must weigh the following competing considerations when planning to maximize tax savings:
· the traditional desire to defer income as long as possible against the currently qualified dividend and long-term capital gain income at lower rates;
· the traditional desire to defer income against the opportunity to incur an inevitable alternative minimum tax (AMT) while the temporarily-increased AMT exemptions are in effect;
· the traditional desire to accelerate deductions for ordinary tax purposes against the AMT consequences of doing so (as more and more people will be subject to AMT, accelerated deductions may not be fully utilized when AMT kicks in).
But 2003 tax law also provides unique tax-planning opportunities. For example, businesses and individual taxpayers with income from a trade or business will enjoy significantly enhanced depreciation deductions for certain property acquired after May 5, 2003. Of course, between now and the year-end, you still have the chance to make that nice gift from Uncle Sam to show up on your 2003’s tax return.
Another example, December 31, 2003 will be the last day that you can seize the opportunity to reform split-dollar life insurance arrangements to avoid additional income imputation to the participants.
We will discuss the smart moves that may suit for your situation in the next three “Tips”. Stay tuned and enjoy the holiday season.
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