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When the Bush Tax Cuts expire in 2011 some of the higher income tax brackets will get even higher. The top two rates for the 2010 federal income tax brackets are 33 percent and 35 percent, which will increase to 36 percent and 39.6 percent in 2011. Congress will decide later this year what effect these changes will have on lower tax brackets (tax rates could decrease for individuals earning below $250k according to President Obama’s proposed budget), but the lower tax brackets are set to increase as well if no change is made. If you fall into a rising tax bracket, and are a small business owner or independent contractor, you may want to accelerate income into 2010 if at all possible. You also may want to consider shifting income by hiring your children or other family members who are in a lower tax bracket. This may also be a strategy for you to have your child or family member deduct their education expenses, where you may have not been able to because your income was too high.
