Capital Gains Tax – Going Forward

Following the last minute agreement made in early January in order to avoid the tax implications of the Fiscal Cliff, we are finally faced with some clarity when it comes to taxes for 2013. However, whilst The American Taxpayer Relief Act (ATRA) dealt with tax components relating to revenue, decisions regarding the spending side have been delayed for two months.

Unfortunately for many, one tax that has been raised was Capital Gains Tax for those individuals earning in excess of $400k annually or $450k for married couples. Whilst this could be seen as bad news, it is a lot better that the original proposal of $300k so some positives can be withdrawn there.

What is worrying however is the uncertainty of where Capital Gains could go from here. In reality, President Obama has already gone as far to say that in addition to the spending cuts which will be hammered out over the next two months, he will also be seeking additional revenue from 2013 going forward.

There is cause for concern to be drawn from the fact that the final agreement of $600 billion is a far cry from the original agreement ironed out by the President and Speaker Boehner in mid-December, suggesting that an awful lot of money has to be found from somewhere. Spending cuts alone will not be enough here and since the national debt has now reached $16 trillion you would be fairly well placed to assume that increased taxes can be expected.

Traditionally, one of the favored taxes when it comes to generating funds is Capital Gains. It has already risen to 20% which is still on the low side looking at the historical figures so you can all but guarantee that the decision makers will look in its direction when they are charged with generating funds.

So what does this mean for business owners? Well, if you are considering an exit in the coming years you would be very well advised to consider your options sooner rather than later as it could save you an awful lot of money. Despite the recent rise, all indications point to further increases, and if the historical figures are anything to go by this could potentially be a lot higher than its current level.

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