Click HERE to hear a recording from our most recent Money in Motion radio show from Thursday, January 3rd, 2013. Also, click on the iHeart Radio icon to stream our show live over the internet at 10am central time on Thursday, January 10th.

Click HERE to hear a recording of Craig J. (C.J.) Klaas on a special 1 hour radio show from Saturday, December 29th, 2012 called Ask the Experts.

Click HERE to read an article written by Steve Schou in the Rockford Register Star Newspaper titled “What exactly is America’s Fiscal Cliff?”

The US markets were up last week after Congress and the President narrowly avoided falling off the fiscal cliff by coming up with an agreement to address some of the tax and revenue issues.

Global markets were waiting with much anticipation for a deal to be made in order to avoid a fiscal calamity in the US. Therefore, once the deal was announced (even though it basically kicks the can down the road on most major fiscal decisions/issues), the market reacted positively for the week.  Below is a summary of some of the major components in the new legislation called the “American Taxpayer Relief Act of 2012” (ironic name for the legislation given that taxes will increase for most Americans starting in 2013).

Individual Income Tax Rates: The act makes permanent for 2013 and beyond the lower Bush-era income tax rates for everyone except people with taxable income over $400,000 ($450,000 for married couples and $425,000 for heads of households). Income above these levels will be taxed at a 39.6% rate (up from 35%).

Capital Gains/Dividends Sunsets: The act raises the top rate for capital gains and dividends to 20% (up from the previous maximum of 15%). The new top 20% capital gains and dividend rate will apply to people with taxable income over $400,000 ($450,000 for married couples and $425,000 for heads of households). According to the Wall Street Journal, “Executives and Insiders” sold company shares valued at roughly $4 billion in December 2012 due to the prospect of capital gains tax rates increasing for them (which they did). For the year (2012), insider selling rose 28% from 2011, to roughly $35 billion, higher than any year since at least 2007.

Personal Exemption Phase-out: The act officially brings back the personal exemption phase-out rules, at slightly higher income thresholds than in the past. Under the phase-out, the total amount of exemptions that can be claimed by a person is reduced by 2% for each $2,500 (2% for each $1,250 for married couples filing separate returns) by which the taxpayer’s adjusted gross income exceeds the levels below.

• $300,000 for couples and surviving spouses
• $275,000 for heads of households
• $250,000 for unmarried taxpayers
• $150,000 for married taxpayers filing separately

Federal Estate, Gift and GST Taxes: The act permanently provides for a maximum federal estate tax rate of 40% (up from 35%) with an annual inflation adjusted $5 million exclusion for estates of decedents dying on January 1st, 2013 or after.

Social Security Payroll Taxes: Even though Congress passed a tax package that protects most Americans from an income tax increase, the legislation didn’t prevent the expiration of the reduction in Social Security payroll tax, which has been in effect since 2011. Social Security is funded by a 12.4% tax on wages up to $113,700, with employers paying 50% and employees paying the other half. Congress reduced the share paid by employees from 6.2% to 4.2% for both 2011 and 2012. However, this expired in 2013, meaning that most Americans will be paying an extra 2% in taxes in 2013.

While these are not all of the acts provisions, they do cover some of the more well-known components of the act. Nevertheless, ALL EYES WILL REMAIN ON CONGRESS AND THE PRESIDENT for the next few months as they still must deal with the debt ceiling limitation and spending cuts over the next few months.

This is for illustrative purposes only and is not indicative of any investments. Investment value will fluctuate with market conditions. Past performance is no guarantee of future results.

(Sources: www.bloomberg.com, www.wsj.com, www.rvhcpa.com, www.economy.com, www.ltam.com)