The Fiscal Cliff: Is it real?
Many of us occasionally hear about this looming "fiscal cliff" on all the news channels. For the most of us, we simply brush it off or just assume its another government program or issue that is too complicated to comprehend. Unfortunately, it is very real and will 100% have an effect on everyone. When your pay check, savings, checking, and investments start shrinking, believe me, you'll notice.
On January 1st, the United States will experience a bit of a tax hike. Wait, thats an understatement. On January 1st, the USA will experience the largest tax increase in the history of the country. Got your attention yet?
In 2001 and 2003, the Bush administration along with the GOP Congress put in place a series of tax cuts for families, business owners, and investors. These cuts will expire on New Year's Day which is the first segment of this 3 part devastation. HAPPY NEW YEAR!
First, personal income tax rates increase across the board. Does this affect you?
-The 10% bracket rises to a new and expanded 15%
-The 25% bracket rises to 28%
-The 28% bracket rises to 31%
-The 33% bracket rises to 36%
-The 35% bracket rises to 39.6%
- Getting married? Great! Except now, there is a marriage penalty because filing jointly is no longer a huge perk. Deductions for children is also being cut in half.
- The Death Tax is back. It actually never left but now it is far more likely that your loved ones will incure a major bill when a family member passes away. If you pass away and leave more than 1 million in assets, then your heirs will incur a 55% tax. Today, its 35% but thats if you leave 5 million or 10 million if married.
- Like to invest your hard earned money? Don't waste your time. Making money these days is hard enough. Currently, the Capital Gains Tax is at 15%. Soon, it will shoot up to a a whopping 23%.
- If you have a large bulk of your assets investmented safely that earn dividends, then you might think about something else. The top dividend tax will rise from 15% to 43.4% in 2013. No, that is not a typo.
These hikes are only the first shockwave of what is yet to come. Stay tuned this week for wave 2 and 3. Just so you know, there are about 25 other increases that will affect all of us. For instance, did you know that Obamacare will hurt the real estate recovery by taxing home owners?