3 ways to beat rising tax rates

In this troubled economy, some tax rate hikes are likely by the end of the year. Here's what to do now to cushion the blow.

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Act like any reprieve on hikes is temporary
Act like any reprieve on hikes is temporary
The battle: In a rare show of bipartisanship, lawmakers back extending the Bush income tax cuts for families earning less than $250,000 and singles with incomes below $200,000. So most taxpayers are unlikely to see a change next year.

But the top rate for higher earners, which will go to 39.6% from 35% if Congress does nothing, is still in play. This fall's political fight will center on the question of whether or not any tax hike will hurt the weak economic recovery.

Smart moves: Even if every cut is renewed, a permanent extension is hard to imagine in this age of deficits. So make hay now. You might convert an IRA to a Roth, especially if your income is low this year. Accelerate income and delay deductions if you can, says CCH federal tax analyst Mark Luscombe.

NEXT: Don't delay needed portfolio fixes
Last updated October 14 2010: 12:30 PM ET
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