Obama Tax Proposal, it may be time to review your year-end tax planning?
The speculation won’t be over until the final bill is written up, passed, and signed into law, but with prospects looking reasonably good for the Obama Tax Proposal, it may be time to review your year-end tax planning. Reuter’s is ahead of the game and recently listed their top three suggestions:
Timing on deductions and income: If you thought you were going to see increased taxes in 2011, you may have planned to push income forward into 2010 and deductions back into 2011. With the Bush-era tax cuts extended to all income brackets this won’t be the case and you can plan on the basis of other concerns.
Investments: Likewise, with the threat of higher taxes it would have made more sense to sell off investments, but that’s not necessarily the case now. Selling off investments in 2010 would have locked in the 15% capital gains tax instead of the expected 20% for 2011, but there is no such increase in the works for the Obama proposal. Instead, the name of the game is the more familiar attempt to balance capital losses and capital gains.
Estate Planning: The Obama plan, and various Republican-backed plans, raises the exemption amount for the estate tax to $5 million with a top rate of 35 percent, instead of the “default” plan which would have set the top rate at 55 percent after a $1 million exemption. This means that fewer people will be subject to the estate tax under this proposal, and those that do will pay less. If you are subject to the tax, however, there’s still time in 2010 to plan for it in the form of estate reduction by means of gifts and charitable donations, things that are conveniently easier in 2010 and are generally in keeping with the holiday spirit.Tags: Charitable donations, estate tax, Obama tax proposal