Maybe you’re trying to ignore the possibility of the President George W. Bush tax cuts expiring. Or perhaps the whole topic is too confusing.
Certainly, everyone will be impacted if the tax cuts enacted by Congress in 2001 and 2003 go away. Here’s what Bankrate.com says about it:
So what exactly will you encounter if next year arrives without any alterations to the current tax law? You’ll face higher income tax rates, more taxes on investment income, fewer tax breaks for families, the return of so-called stealth taxes and a tougher estate tax.
But, there are steps you can take in some instances to prepare for tax increases.
Among the adjustments cited by Bankrate.com is converting a traditional IRA to a Roth IRA. Money taken out of a Roth IRA is tax-free. For 2010 only, you also have the option of deferring any tax that might be owed on the conversion and paying it in equal installments in your 2011 and 2012 tax filings.
Atlanta-based certified financial planner Cass Chappell, who is also a regular contributor to the Atlanta Bargain Hunter blog, had this to say to Bankrate:
“At first blush, it is an incredible opportunity,” said Chappell of the conversion tax deferral option. However, individuals who are now in or expect to be in a higher tax bracket in coming years might want to pay all the tax due at the 2010 rates instead of possibly facing a 35 percent or higher tax rate.
For other detailed tips from Bankrate.com on preparing for the potential end of the tax cuts, click here.