Tax planning for 2010 is going to be a real challenge, and unintended consequences may adversely affect the best-laid plans. Minimizing the tax bill requires a true balancing act between the changes in the tax rates, the differences in the phaseouts between the two years, and the always unpredictable alternative minimum tax (AMT).
There are significant tax savings opportunities for anyone who can control the timing of either a large income item or an itemized deduction. The problem is determining which tax year will result in the greatest benefit. We urge you to reach out to your accountant or tax preparers and discuss the following issues:
Timing of your income (there are no phaseouts in 2010) – take an early bonus, make IRA withdrawals, or recognize some other type of ordinary income in 2010
Accelerating capital gains into 2010 – selling low-bases stock as capital gain rate is scheduled to increase to 20% and the favorable 15% rate is going back to the taxpayer’s marginal rate for qualifying dividends.
AMT tax – there is no “patch” approved for 2010 and the exemption will revert back to 1986 level.
Taking deductions in 2010 vs. deferring to 2011?
Roth IRA – should you convert in 2010 and pay the tax as the income rates are going up?
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