Rates Of Passage

It seems we will probably have to wait until after the November elections before Congress will make any decisions about post-2010 tax rates for ordinary income, capital gains, dividends, or the estate tax, or about the AMT income exemption amounts for 2010. (For a detailed summary of the issues in play, see a recent memo from Deloitte.) If Republicans regain control of the House and pick up more Senate seats, the result could be either no change in current tax rates or a continuing stalemate. Whatever happens, the last few months of 2010 in Congress promise to be exciting, whether you're a tax professional or merely a taxpayer. We will continue to follow related developments closely.

Our July tax alert considered the changes in some of the tax rates that will occur if the Bush tax cuts simply expire (or "sunset") without further action by Congress or, alternatively, if President Obama's proposals are enacted. While Mr. Obama has declared that he will not seek to extend the Bush tax cuts, there is some support for extending them until the economy recovers (see, for example, this article in Bloomberg BusinessWeek).

For a number of years, we have foreseen the uncertainty about post-2010 tax rates that is now flooding the headlines, and we have considered the prospects of a tax increase after 2010. Alongside our insightful articles on financial-planning strategies for possible higher tax rates in 2011 and beyond, our tools can help you with the calculations. All of our tools allow you to easily edit for changes in tax rates and stock price. In most of the situations analyzed by our authors and other experts, tax increases alone should not be the sole basis of your decision to exercise options or sell stock in 2010.