Pre-empting Expected Tax Rate Increases

It is probably a good bet that tax rates are going to be higher in the future than they are today. Beginning in 2013, the employee's share of the Medicare tax will increase by 0.9 percent - from 1.45 percent of earned income to 2.35 percent of earned income - for certain high-income individuals...

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Bibliographic Details
Published inExecutive's Tax & Management Report Vol. 73; no. 7; p. 1
Main Author Redemske, Michael R
Format Trade Publication Article
LanguageEnglish
Published Riverwoods CCH INCORPORATED 01.07.2010
Subjects
Capital gains
Corporate tax planning
Growth stocks
Health care policy
High income
Income tax returns
Income taxes
Installment sales
Investments
Like kind exchange
Medicare
Tax cuts
Tax increases
Tax planning
Tax rates
Tax reform
United States > US
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Summary:It is probably a good bet that tax rates are going to be higher in the future than they are today. Beginning in 2013, the employee's share of the Medicare tax will increase by 0.9 percent - from 1.45 percent of earned income to 2.35 percent of earned income - for certain high-income individuals. At the same time, a new 3.8-percent Medicare tax will apply to most income from investments. For 2010, the highest marginal individual tax rate is 35 percent, while dividends and long-term capital gains are taxed at no more than 15 percent. Without Congressional action, the top tax rate will rise by more than 13 percent to 39.6 percent beginning January 1, 2011. If your business operates as a partnership, LLC, S corporation or proprietorship, and the business has not elected to be taxed as a corporation, then the business profits are part of your taxable income. As a result, the more profitable your business, the higher your marginal income tax rate, and the more likely you'll be paying the new Medicare taxes beginning in 2013. Many aspects of the tax law may change before 2013. But savvy tax planners are already anticipating several changes and are taking steps now to reduce their future tax bills.
ISSN:1098-1594