“Pay no tax before it’s time” is generally good advice, except when you think taxes may cost more in the future than they do now.
What are the odds that tax rates could be higher after 2012?
Ask yourself if you believe one of these two scenarios could happen:
- Congress introduces new, higher taxes for wage income, capital gains and/or estates, or
- Congress lets the current tax law expire at year end 2012, without a new tax plan, thereby defaulting to the higher tax rates that existed under “pre-Bush tax cut era”, as seen below.
Federal Taxes: |
2012 |
2013 |
| Top Rate on Ordinary Income |
35% |
39.6% |
| Unearned income Medicare Contribution Tax |
0% |
3.8% |
| Top Rate on Capital Gains *18% for assets held > 5 years. |
15% |
20%* |
| Top Rate on Qualified Dividend Income |
15% |
39.6% |
| Federal Estate Tax Exemption (single person – married couple) |
$5.12 – $10.24 Million |
$1 – $2 Million |
| Top Rate on Estates |
35% |
55% |
If it seems possible that you may pay higher taxes in the future, talk with your CPA and/or estate tax attorney now to explore legitimate tax saving strategies, such as:
- Accelerating Income
- Giving Gifts
- Selling “Winning” Investments
Take the time to plan and save while you can. Hurry! The current deal on taxes may expire after December 31, 2012.
Karin Maloney Stifler, CFP®, AIF®
President
True Wealth Advisors
Hudson, OH
