NEW YORK ( TheStreet) -- Taxes are set to rise next year as the so-called Bush tax cuts, enacted in 2001 and 2003, expire.

The highest marginal bracket will increase from 35% to 39.6%, the qualified dividend tax rate will disappear, and the long-term capital gains rate will jump from 15% to 20%.

Still, Americans may get a reprieve. According to polls, Republicans and the Tea Party are likely to do well in today's midterm elections. (The Republicans may even gain both the House and the Senate.) So what effect would that have on income taxes?

The real question is how much of a long-term difference would it make to tax rates? In the short run, the Republicans, if victorious, would likely extend the Bush tax cuts. The real question is how long can current tax rates realistically survive? Assuming a right-wing victory, the intention would be to extend current low-tax rates permanently.

However, given our spiraling deficit, any reprieve will likely be short-lived. The federal deficit is projected to be $1.3 trillion in 2010. Social Security and Medicare already account for over 40% of the federal budget, and the political will to cut them will be non-existent. The natural conclusion is tax rates will rise, and any reprieve will be temporary. Do the math!

What should individuals do from a tax-planning perspective? My suggestion is to assume tax rates have only one way to go from here, and that is up.

Tax rates are near historical lows so individuals should look to take advantage of current tax rates. Taxpayers should continue to capitalize on historically low tax rates whether they end in 2010 or are temporarily extended.

Some strategies for dealing with higher rates include: accelerating stock-option exercises, booking large unrealized capital gains, Roth conversions and using asset location for investments. The clocking is ticking to lock in these all-time-low tax rates.

The bottom line is that taxpayers need a plan since our politicians do not have a viable one.
Michael Maye is the founder and president of MJM Financial Advisors, a registered investment advisory firm in Berkeley Heights, N.J. He is a member of the National Association of Personal Financial Advisors (NAPFA) and has been a speaker covering tax topics at NAPFA's national and regional conferences. Maye has also been a frequent contributor to the Star Ledger of New Jersey's 'Biz Brain' and 'Get With the Plan' articles. In addition to NAPFA, he is a member of Financial Planning Association, American Institute of Certified Public Accountants, New Jersey State Society of CPAs and the Estate Planning Council of Northern New Jersey.

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