Americans Could Face a Possible 17% Increase in 2013 Federal Income Taxes + Additional Increases in State/Local/Property Taxes! Here's How to Avoid Some of It

Capital Gains and Stock Dividends

Taxes on income from capital gains and stock dividends are slated to take a hefty hike if the Bush-era tax cuts aren’t extended….

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Long-term capital gains — the tax paid on the difference between the price of an asset when it’s sold and its original cost, would rise from 15% to 20%, or 23.8% for high-income taxpayers, which includes a 3.8% tax on net investments that’s part of the Affordable Care Act. As such, you might want to take your capital gains this year if you have the financial wherewithal to do so…and, conversely, investors who know they are going to be selling assets at a loss may want to save them for next year.

The tax hike is even heftier for stock dividends: rates would soar from 15% to a maximum of 39.6%, or 43.4% for the wealthiest Americans, because qualified dividends would be taxed at the same rates as ordinary income in 2013.

Investments

Markets don’t like uncertainty, and this stalemate is no exception. If the stock market gets spooked by the fiscal cliff debate as negotiations drag on investors…could lose money [because] the markets are worried…[that] going over the cliff) could well throw the economy into a recession.

Medicare

As part of the spending cuts mandated by Congress last year, Medicare Part D would get a 2% cut, which could increase out-of-pocket costs for Medicare recipients. Physicians who take Medicare patients could also see a pay cut, which might prompt more to stop accepting Medicare. Anyone on Medicare should talk to their doctor now about his or her plans and begin researching alternatives just in case. Social Security and Medicaid, however, are exempt from the cuts.

Estate and Gift Taxes

For…[those] looking to transfer assets to their children, the next month could be the best time to do so, as estate and gift taxes could face a hefty increase….[Those] who can afford to make a large gift may want to consider doing so by the end of the year.  For the 2012 tax year, Americans with estates worth more than $5.1 million will pay an estate tax of 35% and, if no changes are made, individuals with estates worth more than $1 million will pay a 55% tax in 2013.

*http://www.thefiscaltimes.com/Articles/2012/11/18/4-Ways-Retirees-Can-Survive-the-Fiscal-Cliff.aspx#Bk3L0MZuPzYfHpTC.99

Editor’s Note: The above post may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

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