The “Fiscal Cliff” and You!

 Ben Bernanke used the term “fiscal cliff” to refer to an approaching financial disaster that will affect the country if certain methods are not taken to prevent this. Budget spending cuts and increased taxes are some of its consequences and it will affect the whole country, which means that you will also be one of the victims.

fiscal ciffFort starters, you’ll have to pay more taxes. The marginal tax is the tax that you pay for the additional money you receive as income.  If this year the level was 10%, 15%, 25%, 33% and 35% in 2013 they could rise up to 15%, 28%, 31%, 36% and 39.6%. This means that you’ll have to pay approximately 2000$ more in taxes; a hefty sum that can affect your whole financial situation. You may have to get a new and better job, right?

That’s too bad because unemployment will rise. Although the recent years saw a decrease in the unemployment rates, many economists believe that about 3 million people will lose their jobs to the slowing economy.  This makes finding a job and even keeping the one you have difficult.

The situation looks even grimmer for those who are already unemployed as going over the “fiscal cliff” means that almost 2 million Americans will lose their federal unemployment benefits.

Tax deduction will drop. If the average American family had some benefits to relieve them from the tax burden, starting from 1st January 2013 many tax deduction options will disappear or decrease. For example the child tax credit will be reduced from 1000$ to 500$. The “fiscal cliff” will surely affect families who have children in college. Up till 2013, families with an income lower than 100.000$ could claim the American Opportunity Tax Credit which allowed them to deduct 2500$ from their taxes. This option is in danger of expiring and so families will have to look for other ways of providing for their children’s higher education.

Investments will be taxed more harshly. Many investors will be affected by the 5% increase of the long-term capital gain tax that will reach 20%. This will affect both the Wall Street investors and the average American retiree who are withdrawing from retirement plans.

 The economical consequences of the “financial cliff” look bad and it will surely affect the income of many middle-class American families. In these harsh times, insurance policies are a wise investment. A life insurance policy will prevent your family from bankruptcy and it can provide for your children’s education. If you want to buy life insurance online, visit our website and you’ll find quotes that will allow you to buy life insurance at incredible rates!