2011 Q2 | Income Tax Rates Hold Steady

2011 Q2 | Income Tax Rates Hold Steady

Tax legislation passed at the end of 2010—the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of2010—maintains the person in effect since 2003. In 2011 and 2012, those rates range from 10% to 35%. In 2012, we might see yet another debate on future tax rates. Capital gains and dividends The 2011 and 2012 tax rates ranging from 10% to 35% are on ordinary income: earnings, interest on savings accounts, pensions, and so on. For long-term capital gains and qualified dividend income (which includes most dividends received by investors), the top tax rate remains at 15% for this year and the next. Therefore, investors are likely to continue to seek dividend-paying stocks and all types of investments that may

2011 Q2 | Income Shifting

2011 Q2 | Income Shifting

The annual gift tax exclusion for 2011 is $13.000. A middle-aged man could give his retired parents up to $26,000 of appreciated securities with no gift tax consequences. If he is married, the man and his wife could give up to $52,000 of appreciated securities to his parents and another $52,000 to her parents this year. The parents in this scenario would retain the original investor’s basis (cost for tax purposes) of the appreciated securities, if they are sold for a gain, and the original investor’s holding period. The new owners would have along-term gain on a sale of appreciated assets held more than one year. As long as the retired couple’s taxable income remains under $69,000 this year, the

2011 Q1 | More Flexibility in Retirement Planning

2011 Q1 | More Flexibility in Retirement Planning

Some provisions of the Small Business Jobs Act of 2010 are not restricted to small companies or to job creation. Instead, they provide more choices for retirees and preretirees. An annuity alternative The new law gives individuals the option of annuitizing a portion of an annuity, an endowment, or a life insurance policy. That is, you can partially convert one of these financial instruments to a stream of income while the remainder is left alone. The annuity period must last for 10 years or more, or for the lives of one or more individuals. Example 1: Carol Thomas, age 70, has invested $100,000 in a deferred annuity. This is a type of investment contract that permits investment income to grow