Between 2001 and 2003, Congress enacted several tax cuts and unless Congress takes action in the coming two and a half months, these cuts will expire on January 1, 2011.

This will have severe tax consequences, including:
•    Child Tax Credit.
Reduction of the child tax credit from US$1,000 to US$500.

•    Personal Income Tax Rate Increase.
The top rate will rise from 35% to 39.6% while the bottom rate will rise from 10% to 15%, with the other brackets seeing increases of 3%.

•    Capital Gain and Dividend Rate Increases.
The long-term capital gain rate will rise from 15 % to 20% while the tax rate on qualified dividends will rise from 15% to each individual taxpayer's marginal tax rate.

In light of these likely changes, taxpayers may want to consider (i) accelerating income to the 2010 tax year or (ii) change the timing of deductions and for example defer charitable contributions to 2011 which will be a year with higher tax rates.