This time of year, I am always amused at the abundance of forecasts as to what is going to happen in the coming year, especially in the financial markets. I would like to see a show on every channel at the END of the year that specifically reviews how the forecasters actually did over the previous year. It is my understanding that in the studies that have been done, the predictions did NOT fare well.
So where does that leave us? I mean, if the “experts” do not know what will occur in the future, then how do we, the common folk, have a realistic chance of achieving our dreams and capturing financial independence?
Put simply, do we have a chance?
Well, the answer is an emphatic YES!!!!
The major provisions of the new tax legislation for 2011 and 2012
1) All tax brackets stay the same as they were during 2010:
a) Lowest income tax bracket is 10%, the highest 35%
b) Long term capital gains will be taxed at 0% for taxpayers in the 10-15% tax bracket and 15% for those in the higher tax brackets.
c) Qualified dividends will be taxed as long term capital gains
2) The maximum tax rate for gift, generation skipping (GST) and estate (death tax) is 35%
3) The maximum lifetime federal GIFT tax exclusion is raised from $1 million to $5 million. This means one person (if he/she has never gifted before) can give away $5,013,000 this year and NOT pay federal gift tax as the $13,000 uses the annual exclusion and the $5,000,000 uses the federal gift exclusion on taxable gifts. This is a tremendous way for a husband and wife to gift $10 million ($5 million each) to children and NOT pay gift taxes now and get the appreciation of the assets out of their estate.
4) The maximum federal ESTATE tax exclusion is $5 million per person.
5) All assets receive a step up in basis no matter the size of the estate.
401K maximum contribution
Plan for the Worst, Hope for the Best