2012 Year End Tax Planning & 2013 Tax Changes

Year-End Tax Planning: 2013 Changes

Don’t Be Unprepared!

The term “fiscal cliff” to describe the upcoming expiring tax cuts and mandatory spending cuts is very appropriate.

Let’s take a brief look at what may happen and what you could to do now to plan effectively and take advantage of the tax rates currently in effect.

Expiring Tax Cuts The “Bush tax cuts” will expire unless Congress takes action after the election.

Individual income tax rates: 2012

2013

35.0%

39.6%

33.0%

36.0%

28.0%

31.0%

25.0%

28.0%

15.0%

15.0%

10.0%

15.0%

Long-term capital gains tax rates: Top rate goes from 15% in 2012 up to 20% in 2013.

Qualified dividend rates: Top rate goes from 15% in 2012 back to 39.6% in 2013.

Estate and gift tax rates: Exemption will go from $5.12mil in 2012 to $1mil in 2013.

Top rateDefer will go from 35% in 2012 to 55% in 2013. taxation

of the values in the life insurance contract by Reduced withholding of 4.2% will expire and revert to exercising the QPEP rider 6.2% for employees and self-employed’s. and still have Death Benefit protection.

Social Security “holiday”:

Products issued by

National Life Insurance Company® | Life Insurance Company of the Southwest™ National Life Group® is a trade name of National Life Insurance Company, Montpelier, VT, Life Insurance Company of the Southwest (LSW), Addison, TX and their affiliates. Each company of National Life Group is solely responsible for its own financial condition and contractual obligations. LSW is not an authorized insurer in New York and does not conduct insurance business in New York.

10%

Centralized Mailing Address: One National Life Drive, Montpelier, VT 05604 | 800-732-8939 | www.NationalLifeGroup.com 65141 MK7122(1112) TC71007(1112)

Health Care Reform Act Changes Medicare Tax Surcharge on Investment Income: For individuals with AGI over $200,000 and for couples over $250,000 there will be an extra surcharge tax of 3.8% on your investment income (interest, dividends, net capital gains, annuity income, royalties and net rental income). The surcharge is calculated on the amount of investment income that is included in your AGI to the extent that it takes AGI above the thresholds of $200,000 or $250,000.

Medical Expense Deduction “Floor”: The existing floor of 7.5% of AGI will be raised to 10% of AGI in 2013.

There’s no way to know for sure what will happen with taxes before year-end. These tax cuts may expire as planned. There may be tax reform that increases tax rates, or lowers them. However, the current tax rates are known, and there may be strategies appropriate to your situation to help you take advantage of the current tax environment.

Talk to your tax and legal advisors regarding these

2012 Year End Tax Planning Ideas • Review timing of income and deductions • Realize capital gains in 2012 • Consider making substantial gifts this year • Convert IRA’s to Roth IRA’s

Medicare Payroll Tax Increase: Individuals making more than $200,000 in wage income next year ($250,000 for couples) would see their Medicare payroll tax on amounts above these levels rise to 2.35% from 1.45%.

• Update wills and estate plan • Establish credit shelter trust(s) by end of year • Forgive a family loan (this becomes a gift) • Gift appreciated assets, rather than cash, to charities to avoid paying tax on capital gains

With Change Comes Opportunity

Talk to your Agent today about a Life Checkup

* The companies of National Life Group and their representatives do not offer tax or legal advice. Please seek tax and legal advice from your appropriate professional advisor. Securities and advice regarding securities can be offered solely by representatives registered to offer such products through a broker/dealer.