End of year-Is it time for Fast Tax Moves?

As we near the end of the year, some major changes are scheduled to
occur. Tax cuts enacted during the George W Bush administration are
scheduled to “sunset”, in other words, expire. The current
administration wants the top federal income tax rates to go up from 35
percent to 39.6 percent, boost long-term capital gains to as much as
23.8 percent and also shrink the estate and gift tax exemption. Although
it has been verbalized that this will only affect the “millionaires and
billionaires”, we have found many of our retired clients who have
modestly invested their entire lives will be affected by these changes.
Following are some examples of how you might be affected by these changes.

*Capital Gains:*An investor who, in 2012, sells $100 worth of stock with
a cost basis of $20 will see after tax proceeds of $88. In 2013 this
same sale will decrease the after tax proceeds to $80.96, an after tax
loss of 8%.

*Dividends: *Income received from stock dividends could jump to as much
as 43.4% from the current 15% level. This is an increase from both the
Bush era tax cuts and the levies set to take effect from the Affordable
Health Care law (Obama Care).

**Estate Tax: **Legislation enacted in 2010 raised the lifetime
estate-and- gift-tax exclusion for 2011 and 2012. This year individuals
can transfer up to $5.12 million—or $10.24 million for married
couples—free of estate and gift taxes. Those levels are scheduled to
expire at the end of 2012 and the current administration wants to set
the estate tax threshold at $3.5 million while dropping the gift-tax
exemption to $1 million.

Our recommendation is that you visit immediately with your financial
adviser to ensure you are positioned correctly for the coming tax law
changes.