WHAT IS THE FISCAL CLIFF ?
41 days left to 2012, and before you know it, another New Year will be here.
As you go about your spending frenzy on Black Friday and Cyber Monday, I suggest you leave a little bit left in that piggy bank for 2013 planning.
Why?
Because of something called the "Fiscal Cliff."
If you've paid much attention to the economic news lately, you may have heard of that term, but how many of you know what it really means?
When you fall off a cliff, you will certainly be severely injured, if not die, and that is the fear that exists in our economy.
The "fiscal cliff" refers to the Bush tax cuts that will expire in 41 days.
In the recent election, the battle cry for "the middle class" was heard loud and clear, but unless this crisis is solved shortly, the "middle class" will really have something to cry about !
Just what does this mean to most Americans?
First and foremost, EVERYONES tax rates will increase. Current income tax brackets of 10%, 15%, 25%, 33%, and 35%, will AUTOMATICALLY increase to 15%, 28%, 31%, 36%, and 39.6%.
Secondly, CAPITAL GAINS taxation will radically change, especially if you have dividend income. For most Americans, tax rates will increase from 15% to a maximum of 39.6%.
Third, if you are still working, your payroll tax will increase from 4.2% to 6.2%.
Fourth, the Alternative Minimum Tax will apply to millions of additional Americans.
Just what is that tax?
Fifth....this is perhaps the WORST for those who have intentions of "leaving monetary legacies" to your children....
The estate tax limit WILL REDUCE from $5.1 million to $1.0 million, and the tax rate will increase from 35% of everything above $5.1 million to 55% on amounts above $1 million.
Not worried about this one? Perhaps you should.
This "death tax" is imposed on the entire value of your estate. Add in the value of your home, your cars, your savings, the value of stocks & bonds (as of the date of death), and the one item most people are unaware of, THE PROCEEDS of YOUR LIFE INSURANCE POLICIES, and you might be surprised how quickly that adds up to $ 1 million.
Will this apply to you? Read this.
Of course there are many estate planning tools that may be employed to minimize how these tax changes will affect you, and proper counsel from a qualified tax consultant should be a MUST within the next 41 days, if this concerns you.
Other changes...MEDICARE PAYMENTS to PHYSICIANS will DROP 30%, and national security concerns are eminent due to the substantial reduction that will AUTOMATICALLY TAKE PLACE in our national defense budget.
Here's some additional information YOU SHOULD BE AWARE OF and THOROUGHLY discuss with your accountant.
Know exactly what changes will take place without some form of action by the congress and president.
And remember this saying:
PEOPLE DON'T PLAN TO FAIL, THEY FAIL TO PLAN.
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