A Happy Ending And A Happy New Year For Taxpayers
In the world of tax-preparation, two-thousand and ten may be celebrated for its happy ending--for both tax-services firms and their customers.
Tax planning is another story.
Given the long tumultuous battle and eleventh-hour compromise in Washington, few taxpayers will have had much time to make any informed decisions.
Fortunately, they probably didn't have to. With the so-called Bush tax cuts set to be extended for two years, rates for income-tax brackets, dividends and capital gains won't be any better or worse in 2011 (and 2012) than they are in 2010.
So, there may be no need to sell your stock-market winnersin the waning days of 2010, knowing you'll be paying less capital gains taxes. (Of course, given that most investors are having an up year, they might want to consider booking those profits while they can, and continue to offset the mega losses of 2008.)
The big winners in the Washington legislative compromise don't know who they are yet. That's because the estate taxwill be more favorable in 2011-2012 then it would have been if the Bush tax cuts were left to expire. The tax-free deduction ceiling will be higher and the tax on any remaining income will be lower. Of course, you or a loved one will have to pass away to cash in on that benefit for 2011. (In 2010, per the Bush plan, there is no estate tax.)
Regardless of the changes (or lack thereof, to be more specific), there are still a number of basic tax planning principlesthat apply and you'll find them in our year-end tax special. One is gifting, and there's no better time of year to take advantage of that.
For savvy investors, there's sound advice on getting the best of the IRS "wash sale rule" , making the most ofcapital gainsand playing the tax-friendly muni market, which has been uncharacteristically volatile and at times foreboding recently.
In a nod to the dynamic changes in the nation's working force, we have some tips for those who've found themselves working as self-employed freelancers or consultants, or even working in another country, as a result of the horrid job market in the U.S.
Of course, Uncle Sam is not the only one after your money; state and local government's want it more than ever, especially when it comes to property taxes. Find out what makes them go up.
And, finally, just in case you need some inspiration to get the ball rolling, check out our list of wacky tax deductions.
So, here's to more money in your pocket and happy holidays.