Preparing for a World of Higher Taxes | Finance Business Marketing

Beginning January 1, 2011, it is highly likely your taxes will increase. For some of you, the increase will be minor. For others, it will be substantial.

As you probably know, the reason for the tax increase is that many provisions related to the ordinary income tax rates and long-term capital gains tax are scheduled to ?sunset? at the end of 2010. These are commonly referred by to, in the news, as ?the Bush tax cuts.? When I left Congress in September to campaign for the November election, so it left us in limbo as to the fate of the Bush tax cuts. If, when Congress reconvenes in November, they can not reach an agreement and, as a result, let the current tax provisions expire on July 1, as they are scheduled to do, you and I will face a higher federal tax bill regardless of income.

Given that uncertainty, I believe you should take steps now to get prepared for a world of higher taxes.

What steps should you take ?

Here are eight action items you may want to consider:

1 Sell ??estate assets appreciated in 2010. Let?s say you own a business or have an investment in real terms. Taking profits may now allow you to take advantage of this year?s lower 15% capital gains rate.

2 Receive income in 2010. In addition to taking profits, so it may be smart to drag into income 2010th One example might be the exercise of non-qualified stock options. Or, if you turned 70 1/2 in 2010, you may want to take your required minimum distribution from your IRA before December 31st, rather than waiting until April 1st. Any income reported in 2010 would be subject to the lower federal tax rates as Compared to 2011. 3 Defer deductions to 2011. Unlike previous years, you may not want to double up deductible items examined as mortgage payments, property taxes and charitable donations at year end since these may be more valuable in 2011 due to higher ordinary income tax rates . not

That said, this is an area where you definitely want to consult a tax professional, Which we are. While this strategy may make sense for many of you given the higher tax rates, there is also the reinstatement of the AGI phase out itemized deductions on that you must weigh it against.

Moreover, the Alternative Minimum Tax may further cloud the issue. If deductions like state and local taxes are disallowed, it may not make any sense to pay them early. Knowing exactly how to play the game in 2010 versus 2011 deductions will require some of you to look at several different what-if scenarios and deterministic mine Which gives the least amount to Uncle Sam. Unless you are a tax geek, that is probably best done by someone who is. 4 Take full advantage of employer-sponsored retirement plan. We hope you are doing this anyway, unrelated to taxes. But if you needed another reason, that is tax deferred income bracket could potentially help to lower your tax. The current annual contribution limits are $ 16.500 for 401 (k), Roth 401 (k) and 403 ( b) plan. There is an additional $ 5.500 catch-up contribution allowed if you are over 50th The annual limit for SIMPLE IRAs is $ 11.500 $ 2.500 with a catch-up if you are over 50th If you are a business owner or self-employed, you may be able to Establish a qualified plan that will allow you to defer even more. 5 Review your savings goals and future strategies. What are you saving for? College? A new house? Retirement? Medical expenses? You may be able to find more tax advantaged strategies for saving that money. For example, putting money into a Flexible Spending Account (FSA) Allows you to pay out-of-pocket medical expenses with pre-tax dollars. Along the same lines, if you participate in a high-deductible health insurance plan, you can fund a Health Savings Account (HSA). HSAs give you both in upfront tax deduction and tax-free distributions for qualifying expenses. You might also consider to after-tax contribution to your IRA. Many people do not even know you can make an after-tax contribution! Why would you want to do that? Even though the money is non-deductible, it will quietly grow tax-deferred Allowing you to potentially save more for your retirement than you would in a taxable brokerage account plain old. Plus, it is protected from creditors and more painful to rob if you are not 59 1/2, acting as a bit of a deterrent to your retirement savings sacking. Just remember though, do not ever let the tax tail wag the investment dog. Never make a bad investment just to save on taxes. 6th Buy long-term care insurance. This is related to number five but reaches beyond just taxes in 2011. Statistics say there is a very high probability you will need some long-term care in your lifetime. If you pay for it out of your pocket, you are paying with after-tax dollars mostly. If you purchase a long-term care policy, you pay a smaller amount in premiums with after tax dollars now but the benefit, which stands to be much larger, is not taxed. Not to mention all the other risk management benefits of a long-term care policy. 7th Review current portfolio and asset allocation. All things being equal, you want to minimize future after tax returns. But again, I would caution you, all things are seldom equal. There is therefore required rate of return, expected rate of return, risk adjusted rate of return and fees to consider. Again, do not let the tax tail wag the investment dog! That said, do not leave money on the table either. For example where, possible, consider using tax-deferred accounts for active investments and short term holdings. Use your taxable accounts, as much as possible, for tax-advantaged and long-term holdings. 8th Consider a Roth IRA conversion. Now here is a strategy I can give my support to almost unconditional. When you convert to a Roth IRA to IRA, Which you can now do without limit, you pay the taxes this year and future distributions are completely tax-free. If you do not think you will need the money in your traditional IRA to fund your retirement, the Roth IRA can also be a very powerful wealth transfer tool because there are no required minimum distributions and beneficiaries can generate rally take distributions from the inherited account tax-free, just like you would have. ? / p> So now what?

I would urge you to review these action items each with your financial advisor. Everyone?s situation is different and what may be the highest priority for you will not necessarily be the highest priority for me. Once you mine deterministic Which strategies will have the biggest impact, create an action plan with the specific steps needed to implement into your financial plan.

Many people want to make the mistake of waiting until December to look at year-end tax strategies. Do not make that mistake. Tax planning is best done throughout the year. And this year in Particular, with the looming threat of Increased taxes for 2011, more than ever it pays to prepare now for a world of higher taxes. The intent of this article is to help expand your financial education . Although the information included may be relevant to your Particular situation, it is not meant to be personalized advice. When it comes to investing, insurance and financial planning, it is important to speak to a professional and get advice that is tailored to your unique, individual situation. All investments involve risk including possible loss of principal. Investment objectives, risks and other information are contained in the Snider Investment Method Owner?s Manual; read and consider them carefully before investing. More information can be found on our website or by calling 1-888-6SNIDER. Past performance is not indicative of future results. id=?article-resource?> is an award-winning entrepreneur, Registered Investment Advisor Representative and a coach and mentor to thousands. She is a mesmerizing speaker, transformational author of How to Be the Family CFO and expert at business and personal finance strategies. When you talk to Kim, she just thinks you?ll find differently than mainstream advisors and planners in the industry. As the founder and CEO of Snider Advisors, a boutique financial advisory firm, Kim has helped thousands learn sound financial management practices. Snider Advisors, which was built on the that a good financial education is the best way to avoid being taken advantage of. That?s why, unlike other financial advisors, we combine financial education and coaching with the products and services we offer. Along with financial education, Snider Advisors provides asset management, medicare supplement insurance, long-term care insurance, life insurance, disability insurance, retirement planning, and professional speakers. Snider Advisors Focuses on teaching others, and holding them accountable for-the skills needed to manage risk, accumulate savings, and Achieve their goals with confidence. The primary, but not the only, tool we created to help our clients Achieve peace of mind amidst economic doubt is the Snider Investment MethodA ?. We?ve also designed a financial education curriculum called the KiM-BA. With this, our mission is to explore, develop, and share sensitive financial strategies with as many people as possible. Visit Kim at

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