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The Cliff and Your Cash

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    Barbara Raasch, RCL Advisors co-founder, on how the fiscal cliff stands to impact taxpayers.

  • Duration 4:05
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I tell us more about the fiscal -- and your money our next guest says income tax hikes may be worst than investors realize that's good news.

Top tax rates are set to go up next year for capital gains dividends and of course income.

This is in addition to the surtax on investment income to pay for the health care law.

And the return of -- he's amendment which is.

Something we are not talking enough about so what -- you -- to prepare joining us with some strategies is Barbara grasps co-founder of RCL advisors.

And former partner at Ernst and young my on the -- I'm glad you're here because.

We are not talking about that piece amendment but let's first talk big picture because.

You have you advised clients basically on.

Esoteric stuff right now because you know what's gonna happen -- -- debt.

Well it's been very prepared for listening to what legislation is going to be coming up can make these like last minute decision -- like for example one of the things that we're saying is you know defer deductions until next year because you get a higher tax benefit for them.

But get yourself positions so that if congress passes some sort of cap right -- You know -- -- right up your charitable contributions last week so -- descendants -- hours a lot of people -- doing a lot of stuff.

-- that and transferring assets to kids that's.

Happening in the month of December selling securities selling real estate that's gonna go down to the wire -- you know that it takes a lot of people to do those sorts of things.

And the other thing is municipal bonds I mean my got like one of the things this dividend income tax.

Taxation on dividend income is probably the worst thing it's literally going from the fact where just ignoring state tax just focusing on -- all.

You not get to keep 85 cents of every dollar of dividends you collect.

Well January want you're gonna K keep 55.

Point four cents that's a lot less -- is assuming they do nothing.

This is -- well this is this is all -- and this is the bush tax cuts you know bomb going away going away.

The surtax on you -- as you say that rate of Medicare -- Plus the peace amendment which do you really kind of creates another one point 2% tax on all and -- So at best stuff is all baked in the cake the thing that's not baked in the cake yet is what else are they gonna do -- If -- for example say you're only gonna get to.

Have -- tax exempt.

28%.

Of the municipal bond in com.

-- -- suggestion that I would have normally that would say you know.

Look at your dividend paying stocks in May be it might make sense to have a little bit less in dividend paying stocks -- a little bit more in municipal bonds.

Because after tax returns -- be better off.

But if my goodness we have that you had a catastrophic.

Yeah.

That says that we don't get full deduction an -- on our exemption for municipal bond income that could change that dramatic -- Everything's out the door let's talk quickly about this -- and -- it because it basically was put in place.

Like George H.

W.

Bush yes yes and now it's expiring at the end of the year we'll talk about this is this affects your itemized deductions.

It to the well no it actually affects your tax.

It what it is it's a phase out.

Of itemized deduction rate for high income people equal to 3%.

Of your -- gross income.

And that was George H.

W.

Bush said no more taxes -- will deal with reductions in staff -- you today I'm -- well kind of made but in -- -- If you're losing 3% of your deductions 3% -- just engrossing com all of your deductions.

You're NASA is paying tax on 100 -- 3% of your income.

So what's an income tax it so means you're you're you're paying tax and a 103% of income.

So your tax goes up if you're top tax bracket one point 2% about Barbara Bush -- keep talking about this case there's so many little idiosyncrasies in the tax law that people don't realize and then get smacked him Jan one.

If our folks don't get it together down there -- us and our CL advisors come back.

I well thank you so much good to -- you.

I assumed that they -- yeah resilience.

Yeah yeah you know you got a call somebody has.

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