Tax Planning with Uncertainty

 If you want to increase your net worth by decreasing your future taxes, you must ask yourself what can I do now and each year in the future.
Congress is working on changing the Federal Tax Code.  How the change will affect each of us is the big question.  No one knows for sure.  However, each of us may be subject to some type of tax increase.  It is unlikely that we will have any type of tax decrease.  It is possible that for some there will not be any change at all.
The voters here in California voted to increase taxes for some starting as of the beginning of 2012.
If possible, it is better to have taxable income this year at a lower tax rate, than taxable income next year at a higher tax rate.
Because of the uncertainty, we must make a few assumptions and prepare a few calculations to help make the best possible decisions with the information available to us today.
The first assumption is that tax rates will probably not go down.  The second assumption is that we cannot determine what our future tax rate will be.
The first calculation is how much additional taxable income we can absorb without increasing our current tax rate.  Next determine if there are any types of income that is due to come in 2013 that can be received in 2012 instead.  Then determine if there are any deductions that can be postponed from 2012 until 2013.  Lastly. consult with your CPA to determine the sweet spot for you.
Be careful because some components of income and deductions can have unintended consequences.  A computer-generated tax projection is required to minimize these unintended consequences.  Your CPA can help you with this.
Jerald Schneider is a Certified Public Accountant providing tax, accounting and financial advice for more than 25 years.  He can be reached at 661-297-1072 or by e-mail at jerald@jeraldschneider.com.