There are a lot of important business tax changes on the horizon, and I always encourage my readers to stay up to date on these new developments. By studying the tax code, and planning your finances throughout the year you can save money when next tax season arrives.
The other day the Wall Street Journal posted a great article on easy tax-saving moves business owners can make. I have included a section of the article below, but if you are self-employed or own a business then I highly recommend reading the full text here.
Higher Taxes on Dividends
The maximum federal rate on dividends will automatically leap to 39.6% from the current 15% on Jan. 1 as the Bush tax cuts expire. Although the president has promised more than once to limit the maximum rate on dividends to 20%, the little-known fact is Congress must take action for that to happen. It's no sure thing. Even if it does happen, the maximum rate on dividends will jump again to 23.8% in 2013, thanks to the additional 3.8% Medicare tax that takes effect that year. So you're facing a 59% increase in the maximum federal tax on dividends (at least).
Higher Taxes on Long-Term Gains
Starting Jan. 1, the maximum federal rate on long-term capital gains will automatically increase to 20% from the current 15%. Starting in 2013, it will jump again to 23.8% due to the additional 3.8% Medicare tax. So you're facing a 59% increase in the maximum federal tax on long-term capital gains too.
What Can You Do?
Thankfully, you still have some time to take advantage of this year's historically low tax rates on dividends and long-term gains. Here are three strategies to consider right now. Don't ponder too long, because these ideas will take some time to execute, and Jan. 1 will arrive before you know it.
Strategy No. 1: Take Low-Taxed Dividends This Year