“You will get all you want in life if you help enough other people get what they want.”
– Zig Ziglar
Our political landscape is very different this week. And it *does* have implications for your wallet (I believe).
I mentioned last week that I’d keep my powder dry, so to speak, and wait a few days after the mid-term elections to deliver my prognosis about what it all means for your taxes. So, here I am today…having gathered the expert analyses, spoken to a few wise hands, and having spent some days “sitting on it” (and enjoying my family before the tax season crush!).
Let me know if you have any comments, or questions.
2010 Election Results … and Your Taxes
Change came back to Washington last week, and, depending on your politics, you may still be basking in the afterglow–or fighting back depression.
But based on pre- and post-election statements, we can make a few educated guesses about what it all means for the taxes YOU will be paying starting next year.
Mind you, it’s still early November, and the “official” tax code hasn’t yet been released, so I hasten to add that this is (educated) prediction-making. But that said, I have been doing this for a while…
The “Bush Tax Cuts”
This is going to be the battle to watch, but with the political winds at their back, the Republicans seem to be indicating that they’ll be pushing hard to extend these tax reductions (from 2001 and 2003), at least for another year.
What makes this most likely is that President Obama seems to agree with them (http://news.yahoo.com/s/ap/20101105/ap_on_bi_ge/us_obama_taxes).
What does this all mean? A few things come to mind…
Capital Gains and Dividends Taxes Likely To Stay Lower
If the “Bush tax cuts” are indeed extended, the tax rate on profits from the sale of long-term assets should stay at 15 percent, even for folks in the upper income tax brackets. And investors whose income is in the 10 percent or 15 percent bracket won’t owe any capital gains taxes.
And, as for dividends, under the current tax law, qualified dividend income is taxed the same as long-term capital gains (that is, at a maximum tax rate of 15 percent). Similarly, those in the two lower income tax brackets received certain dividends tax-free.
Without special treatment, dividends would be treated as ordinary income, meaning they could be taxed at the top marginal tax rate, currently 35 percent (or as high as 39.6 percent in 2011 if the tax cuts expire).
But again, that doesn’t seem to be what will happen.
Tax Brackets on Ordinary Income
Without Congressional action and presidential approval, the current tax rate brackets of 10, 15, 25, 28, 33, and 35 percent would be replaced in 2011 by the “pre-Bush” brackets of 15, 28, 31, 36, and 39.6 percent. Which, of course, would mean across-the-board rate hikes for American taxpayers.
And though I could be wrong, it’s looking good that these lower rates would be retained.
All This Being Said…
There is nothing better than sitting down with someone who will look at YOUR specific situation. Because no matter what Congress does, there are moves you MUST make to lower your tax bill in 2011. I can say with confidence that not sitting down with us before year-end will still cost you.
Email or call us (952-445-8753) now!
I’m in your corner!