Sunset on the Horizon
A series of sunset provisions are set to become effective in two years will bring higher capital gains, dividends and estate taxes to you. These are the results of laws passed in 2001 and 2003.
The 15% tax rate on most long term capital gains and qualified dividend income is scheduled to remain effective until 12/31/2010. For the two lowest tax brackets the tax rate is Zero (0) for 2008, 2009, and 2010.
Beginning in 2011, capital gains rates return to pre 2003 levels of 20% and 10% respectively. Dividend taxes are set to revert to ordinary income tax rates (ouch) Estate taxes, scheduled to disappear in 2010, will reinstate in 2011 to the tax rates prior to 2001 (double ouch).
Keep in mind a new President, with a congressional majority, could pass a new law in 2009 and make the taxes higher retroactive to 1/1/2009. Caution – make and execute aggressive tax planning NOW! Do not wait until it is too late.
The capital gains tax rate reached 50% in the 1970’s. It dropped to 28% in 1978, President Reagan moved it down to 20%. The 2003 law moved dividend tax rates from ordinary tax rates of 39.5% down to 15%. This has been a boom for senior citizens since many live on dividends from major U.S. corporations.
Expect law makers to reach a compromise on estate tax providing and exemption on the first $3-4 million.
Again, like I have written many times, over the past years, you should develop a strategic rollout plan on your IRA’s/401Ks. As you can see taxes are going up. It would be better to pay taxes NOW @ lower rates than later at higher rates. There are ways to take up to $60,000 per year out of your IRA/401K without taxes.
- Get some help…take action now, or, regret it later.