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2013-2014 Tax and Financial Planning: Key Considerations to Help Achieve Your Business and Personal Goals

November 20, 2013


With the many recent changes in the tax code, political and budget uncertainty, and rapidly-evolving business and investment situations, financial planning can seem more like an art than ever. However, these dynamics make financial planning even more important.

Here are key considerations to think about for 2013 and 2014:

Tax Planning

A key to managing your 2013 tax liability is to start preparing as soon as you can. You want to have time to identify and document deductions, organize records and take steps to minimize your tax burden.

One action you can take to reduce your tax bill is to acquire deductible assets such as equipment, machinery or vehicles. Your financial advisor can help you determine when the best time is to make these investments, the proper form of financing to balance deductions with cash flow and how to depreciate those assets. Another key step is to identify tax credits; the IRS lists business tax credits that your company may be eligible for.

These tried-and-true actions may also help reduce your tax bill:

  • Delay income. If you run a cash-based business and cash flow permits, consider sending invoices later than you normally would. Every cent deferred from 2013 to January 2014 won’t have applicable taxes due until April 2015.
  • Pull expenses forward. For example, consider stocking up on office supplies, booking business travel and renewing subscriptions and memberships before the end of the year. This can help maximize your deductions in the current year.
  • Donate to charity. Charitable contributions (up to a certain limit) are generally tax deductible. Be aware, though, that you won’t be able to claim a deduction if you donate equipment that has already been fully depreciated.

On a personal level, 2013 changes include:

  • Two new Medicare surcharges take effect at certain income levels. One applies to unearned income and the other to earned income.
  • Tax brackets have widened, and a new 39.6% rate has been added. For individuals in this bracket, taxes on long-term capital gains and dividends have increased to 20%.
  • Standard deductions and personal exemptions (with qualifications) have increased from 2012. Itemized deductions may be subject to a reduction, depending on your filing status and adjusted gross income.

Retirement Planning

If you don’t have a retirement plan, there’s no better time to set one up. Plans like a 401(k), SEP IRA or SIMPLE IRA can provide tax savings while helping you save for your and your employees’ retirements. Offering a retirement plan also can attract and keep good employees. City National Bank can help you determine which type of retirement plan is best for your business and your personal wealth planning goals.

If you already have a retirement plan, be sure to maximize your contributions. For a 401(k), the 2013 limit is $17,500, with an additional catch-up amount for individuals 50 and over of $5,500 (the equivalent amounts are $5,500/$1,000 for IRAs, and $12,000/$2,500 for SIMPLEs).

Investments

A number of tax changes may apply to your investments, such as Medicare surcharges and changes to the long-term capital gains tax rate. Separate from your 2013 tax situation, consider the following to optimize your investments:

  • Contribute on a regular basis. Even sophisticated investors can be tempted to time the market. In the long run, contributing a fixed amount on a regular basis is the best way to avoid missing out on market growth.
  • Rebalance your portfolio to meet your current needs. The end of the year can be a good time to assess how well your portfolio is aligned with your current needs — for growth, income, stability, tax minimization, etc. For example, if your earnings have increased and you live in a high-tax state, you may want to consider municipal bonds as a way to reduce taxes.

Estate Planning

A number of tax changes may affect your plans to transfer assets to family members or the impact on receiving an inheritance. For example, the estate tax exemption amount for couples is now $5.25 million per person, or $10.5 million in total.

To reduce the amount of your estate, take advantage of planned gifts. A good strategy effectively allows you to take advantage of the lower tax rates of your children or grandchildren. Be sure to value your estate in its entirety when you develop your plan; your assets may include not only your home, other property and investments but also foreign assets, 529 college savings accounts, life insurance proceeds and ownership of your company.

At City National Bank, we understand your wealth planning needs are unique. Our 2013-2014 Tax and Financial Planning Guide can help you make the most of your assets and achieve your financial goals. Call us at (800) 773-7100 or Email Us and request that a Relationship Manager contact you.

City National, as a matter of policy, does not give tax advice. You should consult with your own tax advisor respecting your unique tax situation.

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