And they’re off, down the stretch they go. No it isn’t the Kentucky Derby, it’s the race on for wealthy Americans to save on taxes before the years end. Bush era tax breaks of 2001 are set to expire at the end of 2012. This means that the top federal income tax rate will increase from 35% to 39.6% and Capital Gains tax rates are set to increase from 15% to at least 18.8% and may increase to as high as 33.8%.
There isn’t much any of us can do to avoid the federal income tax increase. However, commercial real estate property owners can sell their buildings before the end of this year to save an enormous amount of cash money that would otherwise be taxed much heavily after 2012.
The good news is that there are alternate investments such as ten year treasury notes that have increased this week to about a 1.7% rate of return.
As of right now, we still do not know the exact percentage the capital gains tax rate will increase to. We do know that as of 2013, the capital gains tax rate will be at least 18.8%.
In my opinion, I strongly believe that the Obama Administration will simply renew the Bush era tax cuts for another year since negotiations have yet to start. There is not enough time for the Administration to revise the tax cuts, have both parties come to an agreement, and have the new proposal signed into law.
The insecurity as to what will happen is negatively impacting todays’ market and continues to slow job growth. Let’s hope the Obama Administration does the right thing for the sake of the economy and job creation and again renew the Bush era tax cuts for at least another year.