As we have completed tax projections for clients this year, it is looking like income taxes are about 10% more for 2013 than for the previous year for those individuals. Several new taxes began in 2013 and the phase-out of exemptions and deductions has been reinstated. This is why we highly recommended that taxpayers see their tax consultants during the year, so they can know what they may owe and still have time to plan for it.
In 2013, tax rates increased for the higher end with the reinstatement of the 39.6% bracket. With the stock market up 30%, if you sold investments for gains, you could easily push yourself into a higher bracket. If your IRA grew considerably, your required minimum distribution may also throw you into a higher marginal rate.
In our experience, people don’t like to deal with taxes until it is time to pay them. It is possible we could see this affect the economy if taxpayers are unprepared for higher tax liabilities. In January, consumers are a bit tight as bills from the holidays are rolling in. We expect that to be extended through the spring once people see what they owe in taxes. Consumers with less discretionary income could translate into lower earnings for companies heavily dependent on them.
Most people put off selling investments at the end of 2013, and they are selling them now, which is why we believe the market is down. Investors have 15 months to figure out how to cover the capital gains taxes. Again, we would encourage all in this situation to see their tax consultants before year-end to explore options for minimizing your tax liability.
At Henssler Financial we believe you should Live Ready, and that includes understanding your investments affect the tax you owe. If you have questions regarding your tax situation, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
