(MENAFN Press) (Newswire.net -- 30, January, 2013) Wilmington, DE --
The Fiscal Cliff proposal was agreed upon by the Senate at the last minute according to Lighthouse Financial source, Ken Brackett. Without the agreement, spending cuts and tax increases totalling 600 billion would have instantly gone into effect. It also introduces the ability for everyone to do Roth conversions, which was only available to those who earned lower than 150K per year, according to Brackett.
This Roth conversion opportunity is available to all those still working and have 401ks. Before this, only those retired, were 59 and a half years old or had changed jobs were able to take advantage of this. This is great news to those of us who believe that tax rates will be much higher in the future, Ken Brackett explained, Individuals can do the conversion at lower tax rates today and buy our tax on sale. In the short term, the government will benefit from this through extra revenue from the tax due after the conversion. In the long term, there will be a loss of revenue as the Roth withdrawals will no longer be taxable income.
Another benefit of the Fiscal Cliff is that there is a tax break for married couples earning less than 450k when filing jointly and 400k for individuals. Originally, just 250k was proposed. The tax rates will remain at 15% and individuals are able to stay on their current brackets for tax. They will be able to gain from the Long Term Capital Gains and Qualified Dividends reduced tax rate.
Estate Tax Exemption was also changed to 5 million per person with the Fiscal Cliff; anything over that will be taxed at the 40% rate. The Alternative Minimum Tax Exemption was also extended permanently.
There is a new hurdle to jump though, according to Brackett. The Debt Ceiling needs to be extended within the next two months. The spending cuts should have been completely resolved during the negotiations for the Fiscal Cliff, which would have allowed the Debt Ceiling to extend in the future at a continuous rate, but this never happened and the House is likely to want to enforce some of the cuts. The probability of another USA downgrade is very likely. Brackett stated.
However, there is some optimism in the fact that there is always a bull market somewhere. There is more focus on the Growth and Value Strategies and Brackett sees success within those areas.