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What to do if Bush tax cuts expire

Adjust for increased income tax rates
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Adjust for increased income tax rates

Taxpayers now find their income might fall into one of six tax rate brackets, starting at 10 percent and topping out at 35 percent.

On the first day of next year, however, there will be only five income tax rates: 15 percent, 28 percent, 31 percent, 36 percent and 39.6 percent.

Today's lowest tax rate of 10 percent will be gone, meaning taxes at 15 percent will be assessed on up to at least $34,000 in income for single filers.

The top tax rate of 35 percent, which now is applied to $373,651 or more in earnings, will be replaced by two higher tax rates of 36 percent and 39.6 percent.

The upshot of this income tax bracket realignment is that everyone will see some increase in their tax bills.

And this means that the usual advice of deferring income is turned on its head. Now tax advisers say it might be worthwhile to accelerate income in 2010 to take advantage of today's lower tax rates.

That's easier said than done, especially if you're an employee. But if you have control over your payments, send invoices in plenty of time to ensure you get the income in 2010.


 

 

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