| With tax season complete, it is now time to look | | | | tax rate is used by individuals who are in the 15 |
| forward and implement some smart tax | | | | percent tax bracket. Their long-term capital gains |
| management strategies to reduce your mitigate | | | | had been tax-free since 2008. In 2011, dividend |
| your tax liability for the years ahead. This is | | | | income (other than capital gain distributions from |
| particularly the case with a number of new | | | | mutual funds) is taxed as ordinary income at your |
| provisions and expiring tax breaks in 2010 and | | | | highest marginal tax rate. |
| 2011. Based on these and extrapolating from 2010 | | | | Estate Tax Revived - For individuals dying after |
| IRS Tax Brackets I have provided my preliminary | | | | 2010, the federal estate tax returns with a |
| view of the 2011 income tax brackets. | | | | $1,000,000 exemption and a 50 percent |
| Higher Tax Rates with Repeal of Bush Era Tax | | | | maximum rate. Congress is likely to take some |
| Cuts | | | | action on these rules during 2010 with a likely |
| Beginning in 2011, tax rates that were in effect | | | | exemption of at least $3.5 million, and it could be |
| prior to 2001 and 2003 will be restored if | | | | set as high as $5 million if the Senate prevails. |
| President Obama does not extend the Bush Tax | | | | Estate tax legislation will include spousal transfers, |
| Cuts. These tax cuts included reductions in some | | | | making the exemption $7 million or more for |
| individual income-tax rates, levies on capital gains | | | | couples. The estate tax rate will be capped at |
| and dividends, changes to the estate tax and | | | | 45%, the same as it is now. While there are likely |
| relief from the so- called marriage penalty, in | | | | to be more easings for the alternative minimum |
| which a married couple may pay morein taxes | | | | tax, there will be no repeal. |
| than if they filed as separate individuals. The top | | | | Child Tax Credit - The credit of $1,000 per eligible |
| income tax rate would go back to 39.6 percent, | | | | child reverts to $500 after 2010. After 2010, none |
| and the special low 10 percent bracket is | | | | of the child tax credit will be refundable to |
| eliminated. | | | | taxpayers unless their earned income is more |
| Whether this actually happens will be a major | | | | than $12,550. This is one of the many Bush tax |
| point of contention in Congress especially in the | | | | cuts currently scheduled to expire after 2010. |
| contradictory light of the recession and record | | | | Further temporary increases in the Earned |
| federal deficits. In all likelihood and based on stated | | | | Income Tax Credit for filers with three or more |
| views, it is likely that the Obama administration | | | | children and the higher income levels for the |
| and Democratic lawmakers will extend income-tax | | | | phaseout of the credit are repealed. |
| cuts that benefit American families earning less | | | | Despite a rising tax environment there are some |
| than $250,000 a year, while allowing tax rate | | | | ways to preparing for the upcoming income tax |
| reductions for high-income earners to lapse. This | | | | changes. Here are some smart tax strategies to |
| means boosts in the top marginal rates from | | | | consider: |
| 33% and 35% to 36% and 39.6% respectively. | | | | - Maximize retirement-plan contributions. You |
| Based on this and inflation, here is what the 2011 | | | | should also consider your retirement accounts in |
| tax tables* could look like, with a comparison to | | | | any assessment of your tax strategy. When |
| the 2010 tax brackets. | | | | rates rise, tax-deductible contributions and |
| Some of the other key new and expiring tax | | | | tax-deferred investment growth can become |
| provisions that you need to be aware of and | | | | more valuable. But although it's true that tax |
| mange include: | | | | deductions will be worth even more if tax rates |
| Increase in Capital Gains and Dividend Tax Rates - | | | | move higher, there's no need to postpone them; |
| This is going to affect a number of Americans | | | | it still makes sense to continue making the |
| who saw their portfolio's battered in 2008-2009. | | | | maximum retirement-plan contribution each year. |
| With the recovery in the last 6 months, it looks | | | | Self-employed taxpayers in particular can set |
| like Uncle Sam may come a calling for some of | | | | aside substantial sums annually in Keogh or |
| those stock market profits with tax rate | | | | simplified employee pension (SEP) accounts, with |
| reductions for long-term capital gains and | | | | contribution limits of $49,000 for 2009. Taxes on |
| dividends expiring this year. In 2011, the maximum | | | | those funds will be deferred until they are |
| long-term capital gains tax rate goes back up to | | | | withdrawn during retirement. |
| 20 percent from 15 percent. A lower 10 percent | | | | |