Plan Now For Future Tax Changes

Fired up for Bam? Love the pants suit off Hill? Ready to go to war for Mac? Great, but this election season you also need to rally around your wallet. No matter who wins the White House in November, tax rates are going to change and more than likely, they’ll go up.

Democrats Hillary Clinton and Barack Obama say they plan to eliminate Bush tax breaks on the top income brackets, increasing the rate for those earning more than $250,000. Obama wants to raise the Social Security wage cap, meaning anyone making over the current level—$102,000—would get hit with higher payroll taxes.

Republican John McCain says he will leave the Bush tax cuts in place, but even conservatives are skeptical. McCain twice voted against the cuts, saying they favored the wealthy, and what’s more, his power would be limited if Congress remains in the Democrats’ control. It sounds dire, but there’s no need to spend 2008 as a financial lame duck. Experts say you can make moves now to minimize your tax burden in the fill-in-the-blank administration. Here are some steps to take to make sure you are not giving too much back to Uncle Sam.

Step #1—Grass-roots organize your money.
Now is the best time to rebalance your portfolio of stocks and bonds. Many people put off this type of spring cleaning because they fear getting hit with capital gains taxes, says William Suplee IV, a certified financial planner in Paoli, Pa. But the current capital gains rate, 15%, is going to look like a dream in a few years. It stands to increase sharply in coming years with some predicting it will rise to 28% in two years. “The rates are really attractive right now," says Suplee. "It’s the lowest in most people’s lifetime."