2013 Tax Rates

[toocold]

Are 2013 tax rates that are being discussed today applicable for income for 2012 (to be filed by 4/2013) or 2013 (to be filed by 4/2014)? I have some vested stock options and wondering whether it makes sense to exercise them this year.

[mwcpa]

unless Congress does something (more likely than not until after the November elections when they do not care about our votes... until then they will pontificate... which won't be what they will do) before December 31, 2012, on January 1, 2013 the tax rates in effect before the Bush era rates will go into effect.

Transactions for 2012 are not impacted by this cliff. But, be aware of the AMT.... the AMT "patch" (as it has been called) to adjust AMT for cost of living adjustments (which has been done every year for the past 10+ at the last minute in most cases) has not been addressed... as many do not look at their taxes until April, many may be in for a big surprise at that time (we can thank the extremist leadership in Congress and the Senate for the impasse, compromise is unacceptable by both of these groups....)

[toocold]

Sept 23, 2012 7:19:22 GMT -5 mwcpa said:

Transactions for 2012 are not impacted by this cliff.

If I sell my stock options (SARs), I will be recognizing the gain through ordinary income, on which I need to pay taxes.

So just to clarify what you are saying, if I sell my stock options this year, I will pay based on the old tax rates, and if I sell my stock options next year, I will pay based on the new "2013" rates. Am I correct?

[mwcpa]

transactions closing in 2012 are "taxed" as 2012 rates.... so, yes

Still you need to be aware of AMT for 2012, the hidden rich person tax that impacts more and more non rich everyday...

[toocold]

Thank you.

Have anybody else thought about selling stock options early? Or do people think that the bush tax cuts will be extended for all tax brackets?