Spring 2013 issue of Horizons

Planning Strategies While the addition of a 3.8% tax on investment income generally shouldn’t warrant wholesale changes to an investor’s portfolio simply to avoid the tax, it is perfectly logical to take a second look at certain investments in relation to their alternatives. Muni bonds, for instance, typically factor their tax-free status into their pricing. If as a result of this law, your after-tax rate of return has fallen, it may make sense to revisit your allocation to muni bonds if this change has not been completely priced into the return. In addition, growth stocks become slightly more attractive due to your ability to defer the tax into the future (or perhaps forever if you hold them to your death). Matching of gains and losses has a bigger payoff as well.

While retirement plan distributions are not subject to the tax, they do push up AGI which can subject more of your investment income to the tax. If you were on the fence with respect to a Roth conversion before, taking the hit one year and perhaps sparing future investment returns from the tax may push you over the line. Only by looking at your own unique situation can you determine if this additional drag on investment and earned income warrants any changes in action. While the amounts may seem fairly insignificant for some taxpayers, when you couple them with possible other income tax increases from the newest tax law change, a closer look would seem to make sense.

RubinBrown Tax Services Group The proactive and creative technical expertise of our tax consultants combined with our personal, long-term relationships with our clients distinguishes RubinBrown tax services.

Steve Brown, CPA – Saint Louis Partner-In-Charge & Chairman Tax Services Group 314.290.3326 steve.brown@rubinbrown.com

Mary Ramm, CPA – Kansas City Partner Tax Services Group 913.499.4406 mary.ramm@rubinbrown.com

Bob Jordan, CPA – Saint Louis Partner-In-Charge Wealth Management Services Group 314.290.3221 bob.jordan@rubinbrown.com

Tim Sims, CPA – Saint Louis Partner Tax Services Group 314.290.3434 tim.sims@rubinbrown.com

Jim Massaro, CPA – Denver Partner Tax Services Group 303.952.1211 jim.massaro@rubinbrown.com

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