Our network

Investors Beware: New Tax Laws Could Cost You | Business

Title (Max 100 Characters)

Investors Beware: New Tax Laws Could Cost You
 Investors Beware: New Tax Laws Could Cost You

While most people are busy eyeing the Presidential election, there is another critical element to which investors and others should be taking notice – the new tax laws that will go into effect immediately following the New Year. These new tax laws will impact everyone from the largest investors down to those struggling to find gainful employment. The more we know about them, the more people can be prepared when January rolls around.

“There are new tax laws that come into play January 1, and anyone who invests needs to know what is at stake,” explains Bernie Wolfe, a CERTIFIED FINANCIAL PLANNER TM Professional and founder of Bernard R. Wolfe & Associates, Inc., a company that specializes in offering wealth management strategies. “These tax laws are not only going to cost investors, but may impact everyone else, as well.”

The new tax laws, which go into effect at the beginning of 2013, will impose a 3.8 percent additional surtax on unearned income for those who are higher income earners ($200,000 for single and $250,000 for married filers). The surtax will apply to dividend and interest income along with capital gains from investments. This may require additional tax planning when deciding whether to sell certain assets. While one should always speak to a tax or other advisor before making any decisions, some ideas to discuss are:

  1. Consider accelerating income for 2012- If you are in the two highest brackets, you may want to consider accelerating income before the end of the year since your tax rate would be higher next year.
  2. Consider locking in loss capital loss carry-forwards- Under current law, you can offset capital gains with capital losses dollar for dollar and carry them forward indefinitely. So a capital loss carry-forward is actually more valuable in years when the capital gains tax rate is higher.
  3. Consider more tax-deferred investments-Because of the surtax on unearned income, it may make sense to invest in more tax-deferred vehicles, such as annuities, depending on your specific situation and future need for the money.
  1. Consider selling assets with appreciation before the end of 2012-If you currently have a gain in an asset that you’ve held for longer than one year and you can get a good price for it this year, then it may make sense to try to sell the asset before the end of the year at this year’s lower capital gains tax rate. Also, you would avoid the extra 3.8% unearned income tax if you are in one of the higher tax brackets where the surtax applies.
  1. Consider investing in assets or vehicles that may provide tax-free income-Depending on your specific situation, you may want to consider municipal bonds or other types of investments that create tax free income.¹ Roth IRA’s can allow you to draw money out tax-free during retirement, so for those in higher brackets, Roth conversions during 2012 may make sense depending on your timeline and specific needs for the money during retirement.²

Some analysts have predicted that, if the new tax change takes place, it may end up driving the country’s economy into a recession. The tax increases can lead to a variety of issues that can impact even those who never make traditional investments. Many businesses faced with higher taxes may in turn need to cut back on hiring people, which could lead to higher unemployment rates.

“Now is not the time for higher taxes,” added Wolfe. “The country is in a fragile state, right now. We need to strengthen the economy, rather than taking steps that could ultimately weaken it. It’s imperative that every person who invests understand how the new tax laws may impact them.”

Bernard R. Wolfe & Associates, Inc., has provided financial management strategies and investment services since 1981. They assist a wide range of private and corporate clients with everything from estate planning and investment to divorce planning. The company also offers women’s financial planning services, led by Samantha Fraelich, a CERTIFIED FINANCIAL PLANNER TM Professional.

About Bernard R. Wolfe & Associates, Inc.

Bernard R. Wolfe & Associates, Inc., founded in 1981, provides wealth management strategies and institutional investment services. The company is led by a team of Certified Financial Planners TM Professionals who have over 50 years of combined years of experience in the field. The team of professionals provides customized financial planning guidance to a diverse range of personal and corporate clients. To learn more about Bernard R. Wolfe & Associates, Inc., visit the website at www.bernardwolfe.com.