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Financial Planning Opportunities For Individuals and Selected Corporate Tax Matters 2010 and 2011 Considerations - Part 1

Table of Contents 

Overview

Observations: 2010 Mid Term elections 

  • Shift in Republicans and Democrats in the House and Senate
  • Leadership: Senate and House Majority and Minority
  • House Ways and Means and Senate Finance Committees
  • Legislative Calendar to December 31
  • Possible 2010 Legislative Action
  • Other Comments

Possible Tax Increase in 2011 

  • If Bush Tax Cuts Expire December 31, 2010 Tax Liabilities Increase for Most Americans. In 2011
    • Top individual rates increase from 35% to 39.6%
    • Long term capital gain rate increases from 15% to 20%
    • Top dividend rate increases from 15% to 39.6%
    • Gift tax rates increase from 35% to 55%
    • Estate tax top rate of 55%
    • Estate tax exemption of $1 million
    • Generation skipping transfer tax returns
    Social Security and Medicare tax will increase for certain taxpayers in 2013

Polling Question Have you considered accelerating income into the 2010 Tax Year?

  • Yes
  • No

2010 Action Steps: Considerations Presuming Tax Rates Are Increasing in 2011 

  • The Following Comments are Fact Specific
  • Accelerate income to 2010, Delay Deductions to 2011
    • Exercise stock options, accelerate bonuses
    • Avoid compensation deferrals to post 2010
    • Sell long term assets (real estate, investment assets, business interests); 15% tax rate on gain
    • Redeem savings bonds for interest at lower rate
    • If decision made to convert to a Roth IRA, consider 100% income recognition in 2010. Part 2010 recognition may be an alternative
    • Rollover provision of 401(k) to Roth 401(k)
    • IRA distributions in excess of required minimum distributions
    • Short sale against the box
    • Delay deductions until 2011 when tax rates increase
     
  • Other Issues to Consider
    • The 3% haircut (reduction) of certain itemized deductions returns in 2011
    • Deductions can be limited up to 80% of the total
    • Observation: The 3% limitation does not exist in 2010; accelerate charitable contributions into 2010 and deduct 100%
     
  • Alternative Minimum Tax
  • State and Local Income Tax, and Adjustments to Federal Income

Next > The Planning Processes and Considerations: The Current Economic and Tax Legislation Environment

The material contained in this presentation is for general information and should not be acted upon without prior professional consultation. 

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