Congress finally put off the inevitable last week and passed the tax cut extension we’ve all been waiting for since the beginning of the year. If you’re not sure how you benefit from the extension, we’ll break it down for you.
With the signing of the tax cut extension, all income tax rates will remain the same for two more years. So we won’t see the possibility of rates going higher until after 2012. It’s not really a benefit over this year but if the tax cut extension hadn’t passed we would all be paying more taxes next year and beyond.
The tax rate on long-term capital gains and qualified dividends will also remain the same for the next two years. The tax rate for both will max out at 15% through 2012. If you’re in one of the two lowest tax brackets (10% or 15%) you will have a 0% capital gains rate. You have until the end of the year to rebalance your portfolio to take advantage of these tax rates for the year. Continue Reading…