Income taxes are going up next year, as are capital gains and likely a host of other taxes. And they won't rise just for those earning more than $200,000 a year, warns Rick Rodgers, a financial planner from Lancaster, Pa.
"Taxes are likely to be higher for everyone," says Rodgers "We all know about the expiring Bush tax cuts, which may or may not be extended for everyone or just some. There are also new taxes that were part of the new Healthcare Reform Law, the expiring payroll tax cut; the alternative minimum tax that already expired in 2011, plus many other provisions that have expired or will expire at year end."
Prepare to pay more
Nearly everyone should prepare to pay more, adds the certified financial planner. But if there's good news, it's that you still have time to take advantage of 2012 tax rates – that may turn out to be the lowest we will see in some time, he contends.
To do that, consider his four tips to take advantage of this year's lower tax rates. Be forewarned: They must be implemented before year-end:
Roth conversion: No one knows for sure what'll happen to the tax code next year. That's why converting traditional IRAs to Roth IRAs is one of the best tax-planning strategies available.
It creates a taxable event in 2012. And, all future earnings in the account will be tax-free, as long as you wait five years and are age 59½ or older when you take withdrawals.