A Tax Strategy Might Be Worth More Than You Think


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4-26-11

These days there are a lot of numbers bandied about when it comes tax laws. You probably have a general feeling that your taxes are going to go up, but do you know how much you’re really going to have to pay this next year? And, looking at it another way, do you know how much a tax strategy could really mean to you?

When the tax bracket increases from 35% to 39.6% this next year, it may look like your taxes are just going up a little under 5%. In fact, if you listen to many politicians, that’s what you’ll hear. But the tax increase is not 5%, its actually 14%! (Oh, the magic of math..)

But that’s not where it ends. If your income goes over $100,000, you start to lose any rental loss deductions. When this kicks in, if you pay at a 25% rate, you suddenly move to a 37.5% rate.

The child tax credit phases out if your income goes over $110,000. That adds another 5% effectively to your tax rate.
If you become subject to AMT (alternative minimum tax), you lose your special capital gains and dividend tax. That means you’ll go from 15% to 22%. (An tax increase of 50%!)

If you happen to get Social Security, your 15% statutory tax bracket goes to 27.75%. That’s an 80% increase!
And we haven’t even addressed the phase-out of itemized deductions and exemptions
.
Bottomline, you’re about to have to pay a LOT more in taxes as tax increases trigger a domino effect of other taxes. A little upturn in income could mean a whole lot more in taxes down the road.

There is still time to make a change in the amount of taxes you pay for 2011. Give us a call to find out how we can help.


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