The midterm elections have changed the political landscape in Washington, with Republicans winning control of the House of Representatives and picking up seats in the Senate. Even so, it is still too early to know exactly how this will affect the array of open tax issues for 2010 and 2011.
Of particular importance, Congress must decide whether to extend any of the Bush-era tax rules that will otherwise expire at the end of 2010. Without Congressional action, individuals will face higher tax rates on their income, including capital gains. Consequently, it may be beneficial to conclude any sales in 2010 to benefit from the lower capital gains rates.
Also, unless Congress changes the rules, the estate tax will return next year with an exemption level of only one million dollars and a 55% top estate tax rate. As such, estates that were under the estate tax exemption level of $3.5 million over the last several years may now be taxable, and estate tax planning steps may therefore be advisable.
In short, year-end planning—which always involves some educated guesswork—is a bigger challenge this year than in past years.
If you have questions about year end tax planning, contact us as soon as possible so that if action is advisable, there will be time to complete the steps before 2011.