2013 Fiscal Cliff is a major concern for many. We know that if congress does not act the Bush tax cuts will end this year. The current rates are (10%, 15%, 25%, 28%, 33%, and 35%) the new rates will be (15%, 28%, 31%, 36%, and 39.6%). Capital gain rates and dividend rates will be changing too. Well now that the media and everyone else has us worried that the sky is falling, what does this actually mean to you? Well if you have not had a review of your tax situation by a CPA or your financial advisor you may be overly concerned for nothing. Depending on your Itemized deductions and exemptions your effective rate will be lower than the marginal rates you see above. Also if you are utilizing a tax-managed portfolio for your investments your rate will be even lower. So the point here is talk to your CPA or financial advisor and have them run a mock tax return for you to determine where you will stand tax wise next year with all things being equal. Many of you may find out that the difference may be negligible. By getting a mock return done for yourself you will know ahead of time exactly what you will be facing. Once you and your advisors are armed with that information you can strategize to see what you can do to further minimize the affects of these tax hikes on your income and investment portfolio.
Sometimes people are not looking at the Big Picture and the things they are doing now from a tax and investment standpoint are so inefficient that once we clean things up it turns out that they will end up paying less going forward under the new laws then what they are paying now. A good tax advisor or financial advisor will look outside the box to save you as much as possible. My partners and I had a person come to see us because they were concerned that with the new tax laws they were going to pay an additional $3000.00 a year in taxes. After reviewing their situation we found that they were paying 1.25% too much on their current portfolio of $500,000. That adds up to be $6,250.00 a year in unneeded fees not to mention they were not using a tax-managed portfolio that could save them even more money. So they went from being worried about paying an extra $3000.00 a year in taxes to extremely happy that after taxes we were able to put more money in their pocket. This is why I always say don’t be afraid to get these things reviewed. If you have at least $200,000 of investable assets My partners and I will be happy to run a free mock tax return for you so you can determine what the 2013 Fiscal Cliff impact will mean to you. We will also make recommendations as to what you can do to enhance your current situation. You can check us out on the web or call us toll free 877-213-7233.