January 1, 2011–Life gets more expensive.

Don’t wish it were easier, wish you were better.

- Jim Rohn

The weather’s getting crisper around the area, and it’s a signal that life is going to shift for all of us. I don’t know about you, but I love these fall weekends with the family–they’re very precious, perhaps because we realize that outdoor activities will be much more limited in a little while.

As I mentioned, the fall reminds us that change is certainly headed our way–but that’s *especially* true come 2011.

First of all, unless something is done by Congress (which we don’t have great reason to think it will happen), the estate tax is coming back in a big way.

But there are a bunch of other changes to the tax code that you should know about, because you still have time to do something about it!

Read on…

New Year, New Taxes

Here’s what’s coming, starting January 1, 2011…

The Return of the Estate Tax

This year, there is no estate tax. However, for those dying on or after January 1 2011, there is a 55% top death tax rate on estates over $1 million. (And you thought you weren’t “wealthy” because your net worth –including real estate– was only $1.4 million?)

And, unfortunately, this will have an impact on gifting, charities, and more.

New, Higher Taxes On Married Couples, Families

The “marriage penalty” (these are compressed tax brackets for married couples) will return starting with the first dollar of your income. The child tax credit will be cut in half from $1000 to $500 per child. The standard deduction will no longer be doubled for married couples and the dependent care tax credit will be cut.

The Personal Income Tax Increase

The top income tax rate will rise from 35% to 39.6%. The lowest rate will rise from 10% to 15%. All the brackets in between will also rise. Itemized deductions and personal exemptions will be phased out if you have “too much income”, which has the same effect as higher marginal tax rates. Here’s the complete list…

* The 10% bracket becomes an expanded 15%

* The 25% bracket becomes 28%

* The 28% bracket becomes 31%

* The 33% bracket becomes 36%

* The 35% bracket becomes 39.6%

Higher Tax Rates on Savers and Investors

The capital gains tax will rise from 15% this year to 20% percent in 2011.  The dividends  tax will rise from  15%  this  year to 39.6% percent  in 2011.  These rates  will  rise  another  3.8%  in  2013.

Further, there are over twenty  new or higher  taxes in  the  new Patient  Protection and  Affordable Care Act (the  Healthcare Reform Act), many of which  will  first  go  into  effect  on  January  1,  2011.

What To Do About This

1)    Get your estate plan done and use your gift tax exemption before it gets taken away. It is a well known fact that the estate tax is one of the “voluntary” taxes that can be eliminated or substantially minimized with proper planning.

2)    Take advantage of these remaining months in 2010 to have your income count during this tax year, instead of 2011 (as much as you’re able to do so).

3)    Don’t be caught by surprise. Plan ahead for this–and make sure your estate planning takes it all into account, as well. It might be the right time to update your plan.