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How will the presidential elections affect me?
Question: Who do you think will get elected president this fall? And how do you think that will affect the economy?
Answer: I've pretty much got it narrowed down to one of two guys…
Other than that, my guess and $2 will get you cup of joe at Starbucks.
But what happens after the presidential election - now that's going to have an impact on the economy - your personal economy and the nation's at large. Here's a quick rundown of what we know is coming:
Federal income tax rates are going up. The so-called Bush era tax cuts are going away at the end of 2012. Congress would have to vote to extend them (again) and that prospect looks highly unlikely. The highest bracket will go from 35% to 39%. The lowest tax bracket will go from 10% to 15%. This tax is on any income, whether from salary or from investments (rents, interest or dividends).
Long-term capital gains taxes are going up. The federal tax on the appreciation of an asset you own for one year or longer is going up from 15% to 20%. For this reason, many who are considering the sale of an asset may wish to do so before the end of this year. Consult appropriate legal and tax advisors before making such a decision. Also, certain dividends have enjoyed a lower capital gains rate. Starting in 2013, they'll be taxed at the higher ordinary income tax rate (doubling that tax for some).
Payroll taxes are going up for everyone. You may recall that payroll taxes were lowered by 2% for workers to stimulate the economy. That break also expires this year, taking another $1,000 out of the pocket of a worker earning $50,000.
Payroll taxes are going up even more for the wealthy. Pity the 1%. Folks earning more than $200,000 (or $250,000 if married) will be paying about 1% more Medicare tax on their wages. But now the Medicare tax will not only be imposed on wages of the wealthy, but on all their income (whether from wages or investments). That adds an additional 3.8% tax on the so-called "unearned" (not wages) income for anyone earning over $200,000 ($250,000 if married).
Tax deductions are going down for married people. The standard deduction for married people (who file together) will go down. And the tax bracket thresholds (for going into a higher bracket) will also come down.
I'm not very good at predicting presidential elections. But I can predict who's likely to pay higher taxes in 2013.
You.
Byron R. Moore, CFP® is managing director / planning group of Argent Advisors, Inc. Email him at bmoore@argentmoney.com. Write to him at 500 East Reynolds Drive, Ruston, LA 71270 or call him at (318) 251-5858. The views expressed in the preceding commentary do not necessarily reflect the views of Argent Advisors, Inc. No forecasts can be guaranteed. Argent Advisors, Inc. does not offer tax, insurance or legal advice. The information contained in this column should not be construed as a substitute for personalized investment, tax, insurance or legal advice.
Sources:
Forefield Advisor
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