We all want to keep as much of our ownas possible, right?
Of course. And that's especially true when it comes to.
Starting this year, many investors likely see tax hikes because of the new imposed as a result of health care reform.
Because the only certainties in life are death and likely pay higher taxes no matter what you do. But you can soften the blow if you plan your tax strategy now., you
But first, a little background on what you face, starting this year.
In 2010, Congress passed the Patient Protection and Obamacare. As many expected, this law included higher taxes on individuals who have what lawmakers consider high ., sometimes called
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Any couple making $250,000 a year or a single tax filer making more than $200,000 sees an extra 0.9% tax on income starting in 2013. On top of that, if you fall into those income categories, you face a 3.8% Medicare tax on your unearned (read: ) income.
If you want to reduce your tax liability and keep more of your , do these six things throughout the year.
1. Reduce Your MAGI
The income thresholds layed out by Obamacare are based on Modified Adjusted Gross Income, so it's important you manage this income. This works best if you are reasonably close to the threshold. If you plan it right, and with a tax planner's help, you can avoid the Medicare surtax altogether.
However, some won't be able to finagle their finances that far. So the following strategies focus more on how you can invest your assets to avoid the label "unearned" income.
If you aren't too attached to your investment income right now, you can take a long-term view and more assets into tax-deferred accounts. If you qualify for a retirement account or HSA -- and have room for more contributions -- you can move your income-producing assets into these accounts. Later, you can withdraw the money during retirement when you have a lower income and may not reach the threshold.
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Other investors like tax-deferred annuities, but that's an individual choice you can make with a's help.
4.Some Of Your In Your Child's Name
Give some of your income assets to your children. The results might be subject to kiddie tax rules, but itavoid the previously mentioned 3.8% tax. The main drawback is that once your child comes of age, he or she control the investment.
5. Switch Your Rental Income From Passive To Professional
When you invest in rental property, it's common to decide to stay out of it as much as possible and just enjoy the income. Unfortunately, there are many cases in which rental income is considered "passive" -- and subject to the 3.8% Medicare surtax that comes with Obamacare.
To get around that, take a more active role in managing your rental assets so you can be considered a "professional." With this designation, your rental income avoids the surtax.
6. Boost Your Business Participation
Business owners might reduce their participation in their business, retain interest in the company and enjoy the income it provides. If you have interest in a business, but don't "materially participate," your income is unearned and itbe taxed under Obamacare. Avoid this fate and become a material participant again. Meet the minimum for participation in a year, and the income suddenly becomes earned.
TheAnswer: Taxes like the 3.8% Medicare surtax need to be planned for all year. Approach your situation in a way that legally reduces your tax liability under the new Obamacare rules.
You'll need to employ long-termto reduce your in subsequent years, so stay on top of your tax situation.