Fiscal Cliff Deal Could Mean Capital Gains Hike

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Washington negotiations over the so-called fiscal cliff have made many investors nervous.

Congress and the White House must reach a deal before Jan. 1 to cut the deficit -- a deal that could include higher taxes on capital gains, dividends, and other investments.

Taxes on capital gains, including profits from stocks, could go from 15 to 25 percent, and taxes on dividends could go from 15 to 43 percent.

The situation is prompting investors to sell their financial assets, like stocks, this year. That way they won't have to pay higher taxes on gains.

"They're accustomed to getting a very large dividend taxed at 15 percent, and the tax could go up to 43.4 percent," Brooks Mosley, president of and client adviser at Security Ballew Wealth Management, told Bankrate.com

"That's got people on edge," Mosely said. "They're wondering, 'When do I get out of these stocks?' In addition to tax concerns, there's the fear that the (dividend-paying) stocks will drop in value if nothing changes."

Adam Sherman, CEO of Firstrust Financial Resources and a certified financial planner, is skeptical Washington will reach a deal before the end of the year.

"I don't think things will get resolved until 2013," he told Bankrate. "I don't think a lame-duck Congress is going to have the wherewithal to make changes."

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