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It’s 2010 all over again when it comes to Congressional wrangling over tax policy. The Bush-era tax cuts were originally set to expire Jan. 1, 2011, but were given a two-year reprieve to avoid dampening the fledgling economic recovery with higher taxes. Unless Congress acts to extend the current rules and rates again, most taxpayers will see higher tax bills starting Jan. 1, 2013. Here are some of the changes to expect and a few ways to plan now to lessen their impact on your wallet.

If the Bush tax cuts are simply allowed to expire, everyone will face higher taxes next year. The current 10 percent bracket will disappear in favor of a new bottom rate of 15 percent. All other rates will also shift higher. The current 25 percent rate will become 28 percent, 28 percent will become 31 percent, 33 percent will become 36 percent and the top rate will rise from 35 percent to 39.6 percent. For investors, higher rates on ordinary income will be joined by the elimination of favorable tax treatment of long-term capital gains and qualified dividends. Currently, gains on assets held longer than one year are taxed at a maximum 15 percent rate. This rate will increase to 20 percent if the tax-cuts are not extended. Dividends, both qualified and non-qualified, will all be taxed as ordinary income. As a result, for some taxpayers, the dividend tax rate will more than double from 15 percent to 39.6 percent. Distributions from qualified retirement plans and IRAs are excluded from net investment income and income from municipal bonds.

Minimizing the impact of these impending tax hikes will require strategies either to accelerate taxable income to 2012, before the rates increase, or reduce future taxable income. Investors should consider realizing investment gains in 2012 to lock in today’s lower tax rates. Realizing losses before year’s end may also be advantageous as these losses can be carried over to future years to offset gains that will be taxed at higher rates. Converting all or part of a traditional IRA to a Roth IRA in 2012 is another strategy for accelerating income to lock in today’s lower rates. When performing a Roth conversion you pay ordinary income tax on the amount transferred out of your traditional IRA in exchange for tax-free withdrawals from your Roth IRA in the future.

Other ways to reduce current taxes and keep income below the surtax threshold include maximizing contributions to 401(k)s and other deferred-compensation plans. Maximizing retirement-plan contributions will also help lessen the tax bite because these reduce current taxable income, a feature that becomes even more important if these salary deferrals can keep your income under the surtax threshold. Finally, it may also pay to reconsider your asset location strategy. That is, what types of investments to hold in your taxable, tax-deferred and tax-free (Roth IRA) accounts. Implementing a well-conceived asset location strategy can help boost the after-tax returns from your portfolio.

Once dividends are again taxed at ordinary income tax rates it will be less advantageous to hold dividend-paying stocks in taxable accounts. Instead, these income-generating investments may provide better after-tax results if they are held in tax-deferred traditional IRA or 401(k) accounts. Growth-oriented stocks with lower dividend yields, alternatively, may be the best asset to hold in a taxable account.

I hope this gives you some ideas to consider and to consider alternative assets in your retirement account.