For many the end of March represents the beginning of spring, warming weather, and the looming approach of baseball season. For others, this time of the year is consumed with the dread of having to deal with a fast-approaching tax deadline. There is usually little to look forward to in tax season other than completing piles of paperwork and learning how much was lost in the last year to Uncle Sam. However, our New York estate planning attorneys suggest that the trudge through tax season can be turned into a positive and used as motivation to come up with long-term strategies to lower tax burdens for the future.
Death and taxes are inevitable. But the process of aging and the stress of tax-paying can vary tremendously depending on how well one plans ahead. Helping with these issues is what our New York City elder law estate planning lawyers do each day. Much can be gained by putting affairs in order and crafting long-term tax saving strategies. Tax season is the perfect time to finally take the plunge.
A recent article from USA Today Money explores the ways that planning ahead can (and can’t) help local residents save down the road. On one hand, it is undeniable that that short-term tax picture is hard to predict, because so much hinges on federal legislative conduct in the next year. Barring action, various tax rates are set to rise at the end of the year (expiration of the so-called “Bush tax cuts”). Top income tax rates, capital gains, dividends, and estate taxes may all rise. In addition, the “marriage penalty” will return along with an increase in payroll taxes.
The tax uncertainty extends to assets that are frequently part of inheritance and retirement planning. For example, without Congressional action, the capital gains tax rate will rise from 15% to 20% at the end of the year and the stock dividend rate will be taxed as ordinary income. It is highly unlikely that any of this uncertainty will be resolved before the election. Therefore, some investors may be tempted to sell these investments before the end of the year to lock in the low tax rates. However, it is important to note that these tax changes won’t affect those with 401(k)s or tax-deferred retirement plans.
There is no way to entirely eliminate tax uncertainly. However, individuals and business should not mistake uncertainty as a reason to avoid long-term planning. Accountants, financial planners, estate planning lawyers and other professionals can explain in detail what can and cannot be done in the future to better position yourself, your family, and your business to save on taxes down the road.
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