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Capital gains tax changes and your business

As we discussed last month, the much-talked-about fiscal cliff made included some changes to capital gains tax rates. Capital gains tax for households earning more than $450,000 (or individuals making more than $400,000) will also jumped from 15 percent to 20 percent. This combines with the health-care reform taxes, bringing the top federal tax on long-term capital gains to 23.8 percent.

Business owners who are considering selling their companies or stocks in 2013 may need to take another look at their tax strategies in light of these changes. To determine the best approach for buying or selling, consider these steps.

First, know your audience. Understanding how the tax rate changes affect the business owners, shareholders and other constituents

Next, know the new rates and how they will affect any transactions. For example, if you sell stock in 2013 you will pay about 8.8 percent more tax on it than you would have in 2012. These rates will be in effect until Congress changes them.

Once you are familiar with the rules and how they affect your stakeholders, you can run the calculations. This should give you a straightforward picture of your situation. Something to keep in mind is now capital loss carryovers are worth more (23.8% vs. 15% to the extent they can offset capital gains).

If you are a business owner who has been affected by recent changes to the tax code, you may be feeling confused or overwhelmed - but you don't have to puzzle it out alone. Consider meeting with a financial advisor or experienced tax law attorney who can help you review your financial situation and determine the best course of action for you and your business.

Source: Inc., "With New Capital Gain Tax Rates, Should You Buy or Sell?" James Markham, Jan. 14, 2013

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