Call Jonathan C. Watts: 925-217-3255

The mantra, “defer, defer, defer”, made popular by your business economics professor is generally a good rule to follow. However, this isn’t the mantra you should be chanting to yourself for the remainder of 2012. Rather, the new mantra should be to “accelerate, claim and accelerate some more”.

Ringing in the New Year will hopefully not find you feverishly writing your New Year’s Resolution that begins, “be aware about this year’s tax implications and manage your business and personal finances accordingly”!

Come 1.1.2013, income tax rates will rise exponentially, barring any negotiated compromise. Also, January 1st marks the Affordable Care Act’s new Medicare tax of 3.8% on unearned income for those who make more than $250,000, married filing jointly, and $200,000, for those single filing. Worth noting is that trading income will be liable to the new Medicare tax.

So, what should you be doing right now? Biting your nails with angst? No! Remember the new mantra, “accelerate and claim and accelerate some more”. If you own a C-Corp it is likely it will make sense to pay yourself the qualifying dividends from your company’s retained earnings. This will take advantage of the low 15% 2012 tax rate and avoid the astronomical 39.6%2013 tax rate. Finally, you should review whether selling your investments that have unrealized gains before 12.31.2012 makes economic sense.

Deferring your expenses probably would be the wrong call to make. Itemized deductions seem to be on the chopping block, both by Romney, many Democratic plans as well as most states. The 2012 itemized deduction rule should be, if you see a deduction, take it!

Of course the election results will further hone the New Year’s trajectory. These are just a few tips on ways to stay informed and savvy in the meantime.

This is just a basic overview and is not legal advice specific to your situation. If you would like to speak with Jonathan about your situation, please email him at or call him at 925-327-1019.

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