Ignorance is never better than knowledge.
-Enrico Fermi
In all of my years paying attention to the tax code, I don’t quite remember a time like this–with so much up in the air, and the political climate looking like it could shift significantly. It’s as if we’re all in a period of “stasis” until November 3rd–when we’ll see where lawmaking will be headed.
That said, there ARE certain things we *do* know. Like the fact that taxes WILL be rising in 2011. So, this is the time when it’s probably a good idea to do what you can to designate any income you might have flexibility over, to THIS year (instead of next).
I realize that for some of my clients, all of this is irrelevant. Tough times, fixed incomes, etc. But I hope that if that’s you, you’ll forgive my addressing those of my clients who are facing more “complex” financial decisions this year.
After all–our philosophy is that YOU know best how to spend YOUR money. Which is why we work so hard to help you keep more of it.
So in that spirit, I’ve put together a series of “do-it-now” tax moves, as well as some to be considering over the next month or so.
Give us a call (414-325-2040), or drop me an email if you need help with any of this!
Kevin Roberts’s
“Real World” Personal Strategy
Do-It-Now Tax Moves, And More
Since so many tax issues are up in the air right now, you should organize your tax moves into three categories: those you should do now, those you can decide last-minute in December, and Roth conversions.
If you have “income flexibility” in any way, your list should include:
“Do-it-Now” Moves
* Make a maximum contribution to your 401(k), which is $16,500; or $22,000 if you’re 50 or older this year.
* Sell taxable bonds now and pay the capital gains tax at 15% rather than a much higher rate in 2011.
* Make gifts of the annual exclusion amount.
“Do It Soon” Moves
* Prepare to give away large sums of money late in December. This year the gift tax is only 35% and there is no “Generation-Skipping” inheritance tax. However, you don’t want to make taxable gifts now just in case Congress reinstates the GST tax retroactively.
* Identify possible charitable contributions for deductions purposes. If taxes go up next year, you’ll want to defer these deductions.
* Accelerate your income if possible. If it looks like taxes rates will rise, you’ll want to take in as much as possible in 2010 rather than 2011.
The Roth Do-Undo
This year, taxpayers can convert regular IRAs into Roth IRAs. There are many considerations in this decision, so do give us a call about it, if you’re considering it (414-325-2040).
Good news: If you convert now, you have until October of 2011 to undo the conversion or decide whether to pay taxes in 2010 or 2011 and 2012.
After all, with Congress putting so many key tax decisions off, this kind 20-20 hindsight could come in handy.