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As we move into the final quarter of 2010, it’s time to revisit current and pending changes in the tax laws that may affect you or your business. Congress has already enacted several pieces of legislation, and it is possible that more changes will come before the end of the year. Although certainly a mixed bag, the good news is you still have time to plan for 2010 and beyond.
Individual Tax Rates
Front and center is the increase from 35 to 39.6 percent in individual income tax rates currently scheduled to occur Jan. 1, 2011. In addition, long-term capital gains rates will increase from 15 to 20 percent, and the most dramatic increase is the elimination of the preferential rate on dividends, from 15 percent to ordinary income tax rates. Dividends will be taxed at your marginal tax rate, whatever that may be given your circumstances. If the dividend rate is to remain coupled with the capital gain rate, Congressional action will be required.
Capital gain rates may never again be this low, so is it time to sell and lock in your gain? Investments and business valuations are also low; does it make sense to sell at the lower end of the market? Is the market at the bottom? Is the economy truly in a recovery? The Estate Tax will “spring back to life” in 2011; should you make gifts and plan for charitable intentions?
These are all questions you should consider during the last quarter of 2010, which may seem daunting, even in the most stable economic and legislative environments. Start planning early, stay in touch with your accountant and stay informed. More in depth information about this and other tax topics can be found on our website, PKFTexas.com/TaxNews.