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Fiscal cliff debate impacts seniors

November 16, 2012

With the election over, much of the country's focus is on whether Congress can reach an agreement and avoid the fiscal cliff. Failure to do so will result in a number of tax hikes and spending cuts set for the start of 2013. The failure to compromise would impact nearly all citizens, and there are a few ways it could affect senior living, according to U.S. News and World Report.

Changes to how dividends are taxed could greatly impact seniors. Currently, retirees who are earning income from their stock or mutual fund investments are taxed at about 15 percent. However, if the country goes over the fiscal cliff, the dividends will be taxed at about 40 percent. In a similar vein, the 15 percent tax on long term capital gains will increase to 20 percent if there is no compromise.

Of course, investments aren't the only areas of senior living that may be impacted by the fiscal cliff, as Medicare stands to be one of the hardest hit areas. According to U.S. News, there could potentially be $11 billion in cuts to Medicare, which would chiefly result in reduced payments to doctors. This could mean a number of things, including having patients pay more or forcing medical facilities to cut staff members.

Whether the fiscal cliff is avoided or not, there are a few changes to taxes that will likely take place, according to AARP. For instance, the deductions on long-term care insurance are expected to rise to $1,360 from $1,310 for adults between 50 and 60. For those between 61 and 70 it will jump to $3,640.