Assume Taxes will Rise in some form-
1. Consider shifting income from the future (2011-forward) to the present (2010). Rates will be higher in future years, therefore value of income net of tax could be worth more today, than after January 1, 2010.
2. Look at your portfolio of appreciated assets and consider taking advantage of capital gain rates at 15% in 2010. Screen your taxable stock portfolio to determine whether taking gains makes sense in 2010 vs. future.
3. Consider converting regular IRA to a Roth IRA. Taxes are paid today at 2010 rates, and withdrawals in the future are tax free. IRA’s may have withdrawals taxed at higher future rates, even though they were contributed in lower rate years. It makes the most sense if you pay up front taxes from other funds and you alternatively intend to pass it through your estate. Also gifts or transfers at today’s low values will shift assets at lower cost, as well.
4. Review your Wills and Estate Planning– Estate and gift tax rates are at their lowest in recent history. Tax planning strategies such as Family Limited partnerships and tax favored trusts are in the gun sights of Congress for change or elimination. Take advantage of last minute ability to change the impact of estate taxes by arranging your estate more logically for a rate increase while strategies still have an opportunity to be grandfathered out of future tax law changes.
5. Reconsider your Corporate Structures with new Rules to be in effect.-
a. Sub-S corporations may be subject to self employment taxes on all shareholders income, including non-salary distributions. A big change. This is proposed in a current pending law.
b. Rate difference between C Corps and individuals may shift to favor corporate tax payments, while still posing a problem for selling the company without double taxes.
c. Foreign Tax Structures may allow deferred accumulation of tax free income for offshore earnings while growing the business. This can be complicated but possible for those building assets and income in oversees operations.
d. Discussions in DC are aimed at Increasing Jobs, so watching the impact of virtually any bill passed may have benefits to consider.
6. Review all Tax Credits available for Taxpaying individuals and corporations before year end
Tax credits(State or Federal) for Low income housing, entertainment production in Georgia, work force hiring preference credits, research and development, training tax credits, empowerment zone, recovery zone and other urban revitalization credits, conservation and easement credits and deductions are available for consideration.
Don’t freeze in Place, call your tax advisor and PLAN, then ACT to realize future saving on higher rates!