What the fiscal cliff deal means for you

Taxes and what the fiscal cliff means for you - Boomfish Wealth GroupFor much of 2012, the fiscal cliff—and the possible changes it could bring—was on nearly every American’s mind.

You’re probably wondering what the fiscal cliff deal means for you and your finances. A recent article in Forbes gives a helpful run-down of the changes that the deal brought, which include the following:

Individual Tax Rates: Most Americans will see the same tax rate. However, the wealthiest will see an increase in their taxes, from 35% to 39.6%. Those who will be exposed to the higher tax are single filing taxpayers with an income of $400,000 and married couples filing jointly with an income of $450,000. 

Investment Income Tax Rates: Again, the wealthiest will pay more taxes on income from capital gains and dividends. Those who fit into the tax bracket mentioned above will see their investment tax rates jump from 15% to 20%. For everyone else, the tax rate will stay the same.

Congress also fixed the Alternative Minimum Tax and applied the fix retroactively, preventing it from applying to approximately 34 million people in 2012.

Payroll Tax: The deal allowed the payroll tax cut from last year to expire. The tax rate will increase from 4.2% to 6.2%, with high-income taxpayers paying up to $113,700.

In addition, the deal phases out personal exemption deductions and itemized deductions for high earners. The phase-out begins at $250,000 for single filers and $300,000 for married couples filing jointly.

Now that we know the income and estate tax rules of the game, the bigger question is what these rules mean to you, and how you can use the rules to do more with your wealth.

There are increased taxes for almost everyone, especially the wealthy, which many don’t favor. However, as I’ve said before, taxes are not the biggest dilemma for the wealthy; having an unclear picture of what you want to do with your wealth is. Taxes are simply the rules of the game that you have to use to your advantage, whatever they are.

Now that the rules of the game are decided, you should seek out a specialist who will help you get clarity about your situation so that you can begin to enjoy for yourselves, right now, Wealth With No Regrets.

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