Typically for me it is around this time of the year that I begin the process of formally organizing my tax records for the purpose of sharpening my pencil, or more specifically, my excel spreadsheets, to see what my tax liabilities appear to look like for the year. I like to think of myself as being a savvy individual who recognizes that by carefully reviewing my tax forecast I might have the opportunity before the end of the year to execute some steps to minimize that bill. Typically that could be, where possible, the shifting of income and/or expense from this year to the next.
So, just like any other year, last night I found myself ready to kick off the process. Now mind you, this is not something that I suddenly sit down and work on. I need to get myself mentally psyched for this because it’s the recognition that I am truly turning the page from all my work with the 2009 tax season and engaging the challenge of a new year.
Suddenly I realized that, unlike other years, at this time I am dealing with a number of significant unknowns. Topping the list are questions of whether there will be an indexing of tax brackets and even more significantly whether there will be any changes actually made in the tax rates. Since we do know that there is no increase in social security benefits because of historically low inflation there just might not be any change in the tax brackets and with a snow balling federal budget deficit rates sure won’t go down, but how high might they go up! In addition, there are probably about two dozen tax provisions that are set to expire in 2009 and it will seem like gambling in Las Vegas or Atlantic City as to the odds of which may be extended and which will not. For example, you are thinking about a new car, but money is tight right now. The problem, in 2009 you can deduct the sales tax on that car, in 2010 you have to hope that it is extended since the tax break ends this year.
So I have a dilemma, as we all do. What’s the better year to incur that medical expense, make that charitable deduction, take that capital gain? There is no elegant answer right now. We are all dealing with the law of probabilities and caught up in the Washington D.C. paralysis of issues such as healthcare and Afghanistan. I can only suggest that as taxpayers we still need to develop the scenario’s that can effect us and maintain a close observation of our representatives in Congress to see how they are leaning in order to sharpen our probabilities. I’ll think of you as I do my tax homework!
