Syracuse, NY – July 10, 2007 – Several years ago, our tax rates on capital gains, dividends and ordinary income were decreased as shown in the table below. At about the same time, government spending increased to fund the war in Iraq . The resulting budget deficits have caused an indebtedness that may need to be repaid at some point in the future. There are two ways to generate the resources for repayment. Government spending can be reduced or taxes can be increased.

The table also indicates that rates are scheduled to increase without additional legislation starting in 2009. Capital gain rates will move from 15% to 20%. Dividends will be taxed at your ordinary tax bracket instead of 15% and ordinary income tax rates will increase in 2011.

Commentators often suggest that you plan your tax affairs based on the tax laws in existence at the time of your planning. However, it doesn't hurt to keep your eye on the horizon and consider some planning based on what you think may happen.

The presidential election in 2008 is likely to result in a philosophical change in direction. If you believe the next president may begin the process of reducing the deficit or, at a minimum, preventing its growth, might we see tax rates increase or an acceleration of the ordinary income tax rate increases to an earlier year? If you believe this may happen, there are a number of planning considerations you may wish to entertain in an environment of increasing tax rates.

As capital gains rate moves from 15% to 20% or higher, taxpayers may consider accelerating the sale of capital assets, such as stocks or bonds, into a 15% year. This requires a careful review of your portfolio and a consideration of your future needs. There are also gifting considerations to your children or parents if they are subject to lower tax brackets.

Change in the taxation of dividends is another area to review and plan. I was willing to pay a premium for dividend paying stock before tax rates on dividends were reduced in 2003. Therefore, I am not suggesting that you sell dividend paying securities before 2009. However, we may see a decrease in their price per share as we move closer to 2009. You may wish to review your options and consider preemptive selling.

We will see an increase in ordinary tax rates as shown in the table. May it occur before the scheduled increase in 2011? If you think so, there are many strategies to consider in an environment of ordinary tax rate increases.

One technique is to fund a Roth IRA or Roth 401(k). Additionally, there are rules that will allow conversions from regular IRAs to Roth IRAs no matter what your level of income. It may not make sense to fund a traditional retirement plan to enjoy a deduction at a lower rate when the money will come out of the plan at a higher rate.

Another strategy is to consider accelerating distributions from your tax deferred retirement plans if you are able to utilize lower rates and tax brackets.

The opportunities for planning in this environment are endless. Accordingly, one of the most useful services you can receive from your tax advisor is thoughtful tax planning advice.

Gary A. Grossman, MS, CPA is a Certified Financial Planner and partner at Green & Seifter, Certified Public Accountants, PLLC. He s pecializes in corporate and individual business, financial and tax planning.