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New Tax Laws Impact Investors


  NEW TAX LAWS IMPACT INVESTORS
by JEFFREY DEROSE, CHELSEA FINANCIAL SERVICES
 


There have been sweeping changes to tax laws that effect the top 1% of American families. Investors need to stay informed of these changes and make plans accordingly to get the most out of their retirement and investment. The two laws that enacted major tax changes was the American Tax Payer Relief Act of 2012 (ATPRA) and Obamacare.

 ATPRA was designed to raise taxes on higher income individuals and families to help lower the fiscal deficit. By closing various loop holes on estates and the passing of assets while also raising taxes on income and investments for various individuals, the government is expecting to raise tens of billions of dollars over the next decade.

Obamacare was a piece of legislation passed to bring healthcare to more families and make some improvements on the health system as a whole. However, part of that bill was raising taxes on the top 1% as well. ®©

Some of the increases are as follows:

  • New 39.6% tax bracket for individuals with incomes over 400K and couples over 450k
  • New 39.6% tax bracket on capital gains
  • Itemized deductions for individuals earning over 250k and couples earning over 300k

Regarding Obamacare:

  • Additional 3.8% on capital gains for individuals earning 200k or couples earning 250k
  • Additional .9% on Medicare tax on for individuals earning 200k or couples earning 250k

These are just a few of the major tax changes effecting families. However, there are many different solutions to help individuals save on taxes for retirement.

  • Tax Deferred Investment Accounts: Individuals can contribute up to $17,500 to an employer-sponsored 401(k) plan and, depending on your participation in a company-sponsored plan, up to $5,500 to a personal IRA. Contributions to Roth IRAs are not tax deductible, but the investment growth inside the account is.
  • Municipal Bonds: Municipal bonds are great because interest is exempt from federal taxes, and if you live in an issuing state they are also exempt from local and state taxes.
  • Master Limited Partnerships (MLPs): MLPs offer the tax advantages of limited partnerships and the liquidity of exchange traded securities.
  • Indexed Universal Life Insurance: An index life insurance policy is structured so that interest accumulates and you can borrow from it without paying a tax penalty. Retirees can use this as a tax free source of income.

These are just a few retirement solutions that can help individuals and families save on taxes. Of course, you should always speak with a trusted financial advisor before making any decisions.

 

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