The Fiscal Cliff
As I write this newsletter, I have No confidence that our elected officials will be able to prevent us from going off the "Fiscal Cliff". I am not an alarmist, but only a realist. It seems like the new tactic of negotiating is Not to talk. We see this with the NHL Hockey Players and their Owners and we have seen this with the Democrats and Republicans. I don't think one side is really any better than the other; but what seems to happen is that they talk at each other, rather than to each other. The idea of debate and a mutual exchange of ideas are so foreign that I am afraid I will be watching KHL hockey from Russia for the next year as I pay a lot more in taxes.
Below are some of the items that will be affected in the "Fiscal Cliff".
Section 179 deduction - This provision in the tax code allows you to take up to 100% of the depreciated value of your laundry equipment purchases within the first year. (I believe up to the maximum value of $200,000). This provision will disappear and reduce our deductions and consequently raise our taxes. Many Laundromat owners have been purchasing new laundry equipment before the end of the year to take advantage of this potentially disappearing benefit.
Estate Taxes - Estate Taxes for 2011 & 2012 will remain with a $5 million exemption and a 35% tax rate for anything above the exemption. If we fall off the cliff the Estate Tax rate for 2013 will jump to 55% and there will be only a $1 million exemption. No one plans on dying, but this a tax against our future estates and our children.
AMT (Alternative Minimum Tax) - First enacted in 1969 to prevent tax sheltering by high-income taxpayers, the AMT has evolved to become a tax affecting many upper & middle income taxpayers. Currently 4 Million taxpayers pay some form of AMT tax. If we fall off the Fiscal Cliff the number of effected taxpayers could jump to 31 Million affected.
Capital Gains - Will rise to 20% from the current 15% rate. This effects anyone who plans to sell their investments (like Laundromats).
Individual Tax Rates - All Tax Rates will rise for the middle income brackets and higher. The top tax rate will rise from 35% to 39.6%.
So what do you do? Pick up the phone can call your accountant and/or tax planner and discuss your options. Now is the time to make a decision before it is too late.
Video Summary of the Fiscal Cliff
|Fiscal Cliff: How Much Would Taxes Rise in 2013?|
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