|2013 Tax Reform, their Impact on Individual Incomes, and What You Can Do About It|
From the plethora of commercials on “How to Become Tax Free” to our Government's uncanny ability to create laws that are either unclear or even contradictory; we're going to provide some much needed insight on the current tax reform situation and what you can do to position your portfolio best.
The two new taxes mentioned below, the Long Term Capital Gain Tax and the Medicare Surtax will have the net effect of taking those who are in the top tax bracket (now 39.6%) to a total maximum tax bracket of 44.3% (39.6+3.8+0.9).
There is a misconception out there that these individuals in the top tax bracket are exceedingly wealthy, but this is often not as accurate as it may seem. Take for example small business owners, who make up the majority of job creators in the U.S. The new tax rates will adversely affect everyone whose businesses are set up where their earnings flow through to their individual income tax returns. According to a NY Times article on Jan. 12, 2013, this will affect more than "half of all companies today." (click here for the NY Times article)
Long Term Capital Gain Tax
Portability Provision Set to Stay at $5M
For example, say a husband and a wife have a $4 million total estate. One spouse dies, using up $2 million of the exemption. The surviving spouse can claim the remaining exemption, which for 2013 is $3,250,000. That would allow the surviving spouse to take that additional exemption added to their own, which this year would be an additional $5,250,000, providing a total exemption of $8,500,000 for 2013. In order to actually receive the additional exemption, the estate tax return would need to be filed “timely" (within nine months of death), plus an additional extension of six months if properly applied for. One caveat, if the surviving spouse should remarry prior to using the additional exemption for gifting, the previous deceased spouse’s remaining exemption would be lost.
We focus on what they call active asset management. Couture Financial’ s Active Asset Management Strategy is about effectively managing wealth during bear markets to reduce the potential for loss and to minimize risk while providing the potential for significant wealth accumulation during bull markets. Couture Financial’s active asset management programs have achieved excellent risk-adjusted performance over the years with substantially less risk in the portfolio.
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