The election is over…how will the results effect income taxes?

Now that the election is over, the best bet is that President Obama will want to increase the tax rate for those who earn higher wages. The Republicans will continue to fight that increase. The President wants to increase the tax rate for those individuals who earn over $200,000 a year and married couples who earn more than $250,000 per year. The so called “experts” predict that those rates will end up at a higher threshold; such as, $500,000 or $1,000,000.

Normal tax planning usually recommends putting off income and increase deductions. In light of the expectations that tax rates are going to jump on high income earners, if you are in that tax bracket, you should consider accelerating your income and paying taxes on those earnings in 2012. Right now, the maximum tax rate is 35%, so that would be the most you tax rate on those earnings this year.

The 3.8% Medicare tax on unearned income is also a factor in this decision. Starting in 2013, the 3.8% surtax will apply to unearned income such as: capital gains, dividends, interest and the like for those over the $200,000/$250,000 gross income level. President Obama is also trying to increasing the capital gains tax rate for 2013.