Tax planning for the end of 2010 and the years ahead are particularly difficult because of the present uncertainty in the law.  The Bush tax cuts are due to expire at the end of 2010, and the estate tax will revert back to the same as it was before 2001.  Congress can enact legislation to prevent or modify the scheduled change in the law, but so far, it has shown little interest (or ability) in doing so.  Many people feel Congress has committed "legislative malpractice" by not acting on these expiring tax provisions. In view of the need for more money for the government, tax increases may be enacted by Congress in order to finance the deficit.

            If Congress does nothing, there will be a tax increase in the top tax rates from 33% and 35% to 36% and 39.6%.  (For married couples filing a joint return, the tax rate for taxable income between $140,000 and $250,000 will be increased from 33% to 36%, and for taxable income over $250,000, the rate will be increased from 36% to 39.6%.  For an unmarried individual, the rate will be 36% of taxable income between $115,000 and $250,000, and will be 39.6% for taxable income over $250,000.)

            The capital gains tax rate is also scheduled to increase from 15% in 2010 to 20% in 2011. The rate on dividend income will also be increased from its current rate of 15% to as high as 39.6%.

            In 2009, Congress amended section 529 to provide that a taxpayer having a section 529 plan could use money in the plan during 2009 and 2010 to pay for a computer or software, provided the beneficiary is enrolled at an eligible educational institution.

            With regard to estate and gift tax planning, there is no estate tax for 2010, so a taxpayer who dies in 2010 will owe no estate tax.  Likewise, there is no generation skipping transfer (GST)  tax in 2010.  However, the lifetime gift tax exclusion is $1 million.  The 2010 top tax rate on taxable gifts is 35%, but the rate will increase in 2011 to 55%.