The United States government has managed to pass a provisional bill to protect the public from plunging over the fiscal cliff, but not everyone has dodged a bullet in this respect when it comes to financial plans. In fact, it's still the American family that will suffer most from this lack of political and economic foresight, so understanding changes and taking action early to protect investments is probably the best strategy for people at all income levels.
Changes to income tax levels are the first things that private citizens need to be mindful of. Those making less than $250,000 will see higher rates than they did in the past, both on annual returns and coming out of regular paychecks, meaning less take-home pay for the lowest earners in the country. The Huffington Post reported that rates for those earning more than that limit are largely the same, and only past the $450,000 cap will there be precipitous increases in remittance rates. What's more, the source wrote that the new legislation sets these brackets in place permanently, so there won't be any more discussion either between politicians or financial services providers about whether these levels could change and spike tax rates for those at varying income levels.
Broken tax breaks hurt lowest earners
Again harming the lowest earning bracket, CBS News stated that critical tax credits and tax breaks were largely done away with. These items include the Child Tax Credit, Child and Dependent Care Credit, Earned Income Tax Credit and the American Opportunity Tax Credit, all of which could add up to about $6,000 in annual deductions for low-income households every year. For those accustomed to getting a big refund check each year, especially with the assistance of these write-offs, there's little hope of these kinds of payouts in the near future.
One of the biggest concerns, to top it all off, is that the legislation being written into law won't raise as much money as previous proposed deals might have. CNN wrote that this could mean a return to the recession, or at least something close to it. In order to protect personal assets, financial investment advice may be necessary to take advantage of current tax breaks where they can be found, fortify existing portfolios and put up defenses around personal wealth to protect it from the potential oncoming economic maelstrom.