In addition to the Affordable Care Act surtaxes, there may be additional changes to tax rates starting on January 1, 2013. In this WEALTHWISE, we discuss potential changes to your income and capital gains taxes.
Congress has yet to take any definitive action regarding the tax laws starting in 2013. But, if Congress takes no action before December 31st, tax rates for your income, capital gains and dividends will revert to the rates existing prior to 2001.
Where things stand now
Income Tax Rates
Tax rates for your ordinary income (like your salary) will increase for all tax brackets. If you are in the highest tax bracket, the rate will jump from 35% to 39.6%.
Capital Gains Tax Rates
Your new tax rate for long-term capital gains will be 20% in 2013 rather than the current 15%. You are subject to this tax if you sell shares of a stock or mutual fund that you have held for more than one year.
Dividend Tax Rates
If you have dividend-paying stocks, you will no longer be taxed at the 15% rate. Instead, you will be taxed at your ordinary income tax rate. This change also applies to mutual funds that pay dividends.
The next step
Remember, the tax rates we mentioned above assume that Congress will make no changes to the tax rates for 2013 & beyond. Your PERSONALCFO will be closely monitoring any new developments in this area.
Even if rates change as noted above, there are several strategies that your PERSONALCFO can recommend to lower or eliminate the effect of the rate changes. Your PERSONALCFO is looking at your personal situation and will be contacting you in the next few months to coordinate strategies with your CPA to determine the best course of action.
The next WEALTHWISE will discuss changes to estate and gift taxes starting in 2013.