Fiscal cliff: Looming tax hikes turn experts’ year-end advice topsy turvey

Fiscal cliff: Looming tax hikes turn experts’ year-end advice topsy turvey
News from Kansas City Star:

At 72, Paul Nagorski likes to own stocks that come with their own payday. Dividend checks add to his income.

The Kansas City resident soon may be sharing more of his investing income with Uncle Sam. Like other investors, he’s heading for a tax cliff on Jan. 1.“I’ll pay more,” Nagorski said. “I can afford to do it. I don’t like to do it.”Now that the election is over, attention has turned to how President Barack Obama and Congress intend to deal with the automatic tax increases and spending changes set to kick in on New Year’s Day. Lawmakers had set up this fiscal cliff to force themselves to negotiate a long-term reduction in the federal deficit. Failure to reach a deal would mean a sudden drop in federal spending, an end to the Bush-era tax cuts and other tax changes on Jan. 1.Dividends, stock gains, estates and even ordinary income would be taxed at higher rates — with the impact being felt broadly in the investing world.Even investors inside tax-deferred accounts such as 401(k) plans and individual retirement accounts could feel the lingering changes wrought by the tax side of the fiscal cliff. This automatic rewriting of tax rules stands to make many investment choices less attractive, and a few more valuable.The traditional year-end advice from tax experts has turned topsy turvey. The standard advice, to sell losers to offset profits and reduce taxes, is morp…………… continues on Kansas City Star

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