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Integrated Wealth Management

Goodbye 2013: Year-End Planning Countdown

As 2013 comes to a close , we would like to provide you with last minute planning ideas and reminders: Estimate your 2013 taxes: As Chris discussed in his blog earlier this year in “3 New Stealth Taxes Could Trip you Up”, 2013 will be the first year when high-income earners (couples with %250,000 AGI or $200,000 single filers) will face the new 3.8% surtax on investment income and phased-out itemize deduction and personal exemption. What you want to do is to minimize your adjusted gross income- the number at the bottom of the first page of your tax return, before deductions.

Among the moves that help -- contributing to tax-deductible IRA, 401K, realizing capital losses, having tax-free municipal-bond income, deducting moving expenses, and health-savings-account contributions. Be sure you have taken the new tax changes into consideration when calculating your estimated tax payment.

Maximize medical and miscellaneous deductions: The hurdles for medical deductions are now 10% (tax payers age 65 and older get the hurdle rate of 7.5%) and 2% for miscellaneous expenses respectively. You might want to consider bunching expenses from more than one year to claim the deductions at once and get over the hurdles. The list of qualified medical expenses is long, see full list at .

Review your health plan: if you have an individual plan and intend to keep it as is for the time-being, be sure to review and see if you need to give notification to reenroll. If you want to sign up for health plans through Covered California, the deadline is December 23rd for coverage beginning January 1, 2014.

Manage income for health care tax credits: It is very important to proactively mange your income with the premium assistance tax credits in mind. Creating income may make you eligible for premium assistance tax credits (and avoid being transferred to Medi-Cal), but too much income can also render you ineligible. A good way to create income is by doing a Roth conversion.

Health Savings Account: Maximize your contribution to a health savings account up to $3,250 for individual and $6,450 for family. If you are over age 55, you can contribute an additional $1,000.

Self-employed 401K: If you plan on contributing to self-employed 401K, be sure to open your account by December 31st. You have until April 15th, 2014 to make contribution to this account.

Required minimum distribution: make sure you have taken enough from your retirement accounts to meet the minimum requirement.

Charitable distribution from IRA accounts: If you are over age 701/2, you can direct your IRA custodian or trustee to distribute directly up to $100,000 to one or more qualified charities before year-end. This distribution will count toward the required minimum distribution and wont’ be taxable. This provision will go away in January 2014 unless congress extends it.

Annual gifting to family members: The annual gift tax exclusion amount is $14,000. This means you can give up to $14,000 to any individual tax-free. Spouses may “split” their gifts to each one, effectively raising the annual maximum exclusion to $28,000. Same-sex married couples for the first time in 2013 will be able to take advantage of this exclusion as well. What better way than this to contribute to your grandchild’s 529 college saving account?

Health Flexible Spending Account (FSA): Use –it-or-lose it rules for FSAs allow cafeteria plans to provide for a 2/1/2 month grace period after the current year to incur expenses and request reimbursement. However, plans are not required to offer this grace period so you should check before year-end whether you need to use up your account by December 31st.

We hope you all have a happy holiday!