Like it or not, if you are in the upper-income brackets you should probably brace yourself to pay more taxes at both the State and Federal level in 2011. Until the Washington Brain Trust (and of course I mean that facetiously) makes their final decision, it is anyone’s guess as to what will happen on a national level, but here is a little input from my friends at Northern Trust as to the most likely scenarios –
- If your household income exceeds $231,300 (or if you are single $190,650) the tax rate will likely increase from 33% to 36%.
- If your household income exceeds $373,650 the highest 39.6% tax rate will likely take effect.
- If you are in those top two brackets the long-term capital gain tax is likely to increase from 15% to 20%, with interest income taxed at the income rate.
- You should also anticipate a lowering of value on charitable deductions. It is likely that deductions would be limited to 28% for those in top brackets.
The above would point towards doing some good tax planning during the balance of the year. For instance, consider maximizing long-term capital gains (2o10 might be a good year to sell your company!), and maximize your gifts to charities this year.