Nov 7 Uncertainty about who will occupy the White House is over now that U.S. President Barack Obama has been re-elected, but uncertainty about taxes is still with us. There is no need to feel paralyzed though.
Tax advisers say it is possible now to suggest tax planning moves that could be a smart way for individuals to play a second Obama presidency, though a lot of variables remain.
Much will hinge on how the new Congress behaves, but if Obama gets his way, individual income tax rates would rise in 2013 on families earning more than $250,000 a year, and individuals earning more than $200,000.
Regardless of Congress's conduct, taxes on investment income will rise next year by at least 3.8 percent thanks to the funding mechanism for Obama's healthcare system overhaul.
Other possibilities under an Obama second term could include higher estate and gift taxes, as well as caps on tax breaks for charitable giving and mortgage interest.
Planners are advising clients to consider making the most of tax deductions this year and to be generous, among other steps.
"There is no way capital gains (tax) rates are going down in 2013," said Mark Vorsatz, managing director at San Francisco-based financial advisory group WTAS LLC.
So Vorsatz is arguing for selling investments with big paper profits before New Year's Eve.
Selling close to year-end would make finding offsetting losses difficult, said Sandra Bragar, director of planning for San Francisco wealth advisory firm Aspiriant.
But with dividend and capital gains rates, now 15 percent, set to climb 3.8 percent, Bragar said a year-end sale may be better than waiting for earnings to balance out higher taxes.
Goldman Sachs analysts predicted in a Nov. 1 report that, with an Obama White House, dividend and capital gains tax rates could rise toward 25 percent, again depending on Congress.
Some people are accelerating gifts under the current $5 million ceiling on lifetime giving, including through an estate. Obama backs a lower cap of $3.5 million and raising the estate tax on anything over the cap to 45 percent from 35 percent.
"To say estate lawyers, valuation experts and CPAs (certified public accountants) are busy right now is a real understatement," said Kelly Toole, a tax services managing partner at accounting firm Baker Tilly Virchow Krause.
Of course, another distinct possibility is very little changes, especially since Congress appeared likely late on Tuesday to look much as it has for the past two years of stubborn gridlock on taxes and spending.
The most urgent issue on the near horizon is the so-called "fiscal cliff" coming at year-end. If Congress takes no action, income taxes will rise for almost everyone and millions more people would owe the Alternative Minimum Tax.
Falling off the cliff risks a major political backlash from voters though. So most experts said politicians will be motivated to make a deal. After all, the next national election for Congress is only two years away. (Editing by Kevin Drawbaugh and Leslie Gevirtz)