Agnes Spoelker, CPA
Agnes Spoelker, CPA

We have already seen major tax changes this year, and more are almost certainly coming. Through all of the changes to date, the 2010 federal income tax environment is still quite favorable. However, we may not be able to say that for 2011 and beyond.

Therefore, tax planning actions taken between now and year-end may be more important than ever, and some long-held assumptions might not hold true this year.

Income tax rates are likely to rise in 2011 – almost certainly for those folks in the highest tax brackets, possibly for those in any tax bracket. As a result, it might be worth taking a bigger tax hit this year in order to have less taxable income in future years.

For starters, that could mean not deferring taxable income from this year to next. For some people, it might even be worth doing the opposite and accelerating income into this year.

Depending on your situation, you might also consider selling appreciated securities this year rather than next year. The maximum federal income tax rate on long-term capital gains is scheduled to rise from 15 percent in 2010 to 20 percent in 2011, unless Congress takes action.

For more tax-planning ideas – and more details on the ideas suggested in this e-mail – click here. If you would like to discuss how these ideas are applicable to your situation, contact Tax Specialist Agnes Spoelker or your Barnes Dennig tax professional at 513.241.8313.