If you're voting your pocketbook, whether you choose John McCain or Barack Obama may depend on your income.
McCain's tax policies favor high-income households; Barack Obama's largely benefit low- to middle-income families.
And if you're above middle income, but not too rich? Well, for you, there's not much difference.
Of course, you don't want to rearrange your finances based on the proposals so far. Not all the details are in. More policies may roll out before the election. You don't know who will win. And even if your candidate does, Congress might not give the green light to all the tax cuts promised.
What you can count on is the new president signing some tax law in his first year, at the very least to fix the estate tax before it temporarily disappears in 2010.
Still, given what we know now, here's the outlook for taxes and a few strategies for dealing with them:
*Individual income tax rates: McCain would extend today's income tax rates that are scheduled to expire and go up in 2011.
Obama, too, would keep the four lowest brackets, but restore the 36 percent and 39.6 percent brackets for those earning more than $250,000.
If Obama is elected, you might want to exercise nonqualified stock options that are taxed as regular income before you're bumped up into the 36 or 39.6 percent bracket, says Michael Kitces, director of financial planning for Pinnacle Advisory Group in Columbia.
*Taxes on capital gains and dividends: McCain would stick with the status quo, where investors don't pay more than 15 percent on long-term capital gains and most dividends.
Obama would retain the current rates for everyone except those in the two highest tax brackets. For them, he would create a tax rate on gains and dividends ranging from 20 percent to 28 percent. He's leaning toward the lower end of the spectrum, his campaign says.
If you have a family business, consider extracting profits in the form of dividends before Obama's higher dividend tax rates kick in, Kitces says.
Or, if your portfolio is heavily weighted in a single, appreciated stock, consider selling shares before your capital gains tax rate rises, says Bob Cassel, director of tax services at Baltimore-Washington Financial Advisors in Columbia.
Don't sell off stocks paying generous dividends, even if dividends will be taxed at a higher rate, Cassel adds. In today's bearish market, you need dividends to boost your total return, he says.
