There will be some significant potential consequences on the horizon if Congress allows certain existing tax laws to expire on January 1, 2013. With only a few months left to plan, clients will be facing many decisions.
Several tax changes are now set to occur at the beginning of 2013 if Congress does not act. Among them:
Individual income tax rates will go up
Long-term capital gains rates will rise.
The gift and estate tax exemption will drop from $5.12 million to $1 million. Estate assets exceeding the $1 millioing exemption will be taxed at a maximum 55% rate.
Taxpayers whose income exceeds a set “threshold amount” will be subject to a 3.8% Medicare surtax on net investment income, effectively raising their marginal income tax rate. An affected taxpayer in the 39.6% bracket — the highest bracket in 2013 — will have 43.4% marginal rate. This will apply to individuals, as well as trusts and estates.
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