Tax Increases Expected by 2011

Higher Taxes Are Coming. Are You Prepared? Wall Street Journal, September 13, 2009:

As the recession and bailout have pushed this year's federal budget deficit to an unheard-of $1.6 trillion, an unpleasant reality has dawned: Taxes are going up. The only questions are when, how much, and for whom?

The answers depend on the shifting sands of wealth politics and the scope of health-care revision. "But everybody thinks that by 2011 tax rates will be higher, at least for those with higher incomes," says Thomas Ochsenschlager, a tax official at the American Institute of Certified Public Accountants.

This certainty turns traditional tax-planning logic upside-down. Taxpayers have long been advised to defer taxes as long as possible, especially by making contributions to tax-sheltered IRAs and 401(k)s or holding assets for years in order to postpone realizing gains.

Now taxpayers should reconsider this rule. The current top capital-gains rate of 15% on most assets is the lowest in living memory and the Obama administration has proposed raising it to 20%. Another proposal might tack on a 4.5% surtax for the wealthiest taxpayers. So it may make sense to realize long-term gains now, says Robert Gordon, who advises clients on sophisticated tax matters at Twenty-First Securities in New York....

See also: Barack Obama's Tax Policies

IRS Increases Standard Mileage Rate

The IRS has announced that, effective July 1, 2008, the standard mileage rate will increase from 50.5 cents per business mile to 58.5 per business mile. The change is in recognition of higher gasoline costs.

The medical and moving rate also increases, from 19 to 20c per mile, but the charitable purposes rate of 14c remains unchanged.

The 2009 mileage rate has yet to be determined and announced.

To those Californians that wonder, if - given the higher gas costs here - the rate varies state by state, the answer is no, although, for some taxpayers in certain instances, using actual automobile operating expenses rather than the standard mileage rate is an option that should be discussed with their accountant. Employers typically reimburse employees for business miles at the IRS standard rate.