video transcript

Now that Congress approved a deal to avert the fiscal cliff, the wealthiest Americans will be hit with the biggest tax increases they've seen in years. So what do they do now? Under the deal, income tax rates will increase from 35 to 39.6% on income above $400,000 for individuals and $450,000 for married couples. According to the Tax Policy Center, households making between $500,000 and $1 million in 2013 will get an average tax increase of nearly $15,000. Households making more than $1 million will get hit with more than $170,000 in taxes on average. The deal sparked a relief rally on Wall Street even though the measure would raise long-term capital gains taxes for high income earners to 20% this year from 15% last year. Even so, experts say wealthy investors with an appetite for risk should not shy away from equities. Gary Schatsky is President of ObjectiveAdvice.com. SOUNDBITE: GARY SCHATSKY, PRESIDENT, OBJECTIVEADVICE.COM (ENGLISH) SAYING: "You're just earning a little bit less. So the key is to balance your risk tolerance along with the tax advantage of capital gain growth." With capital gains being taxed at higher rates, experts say tax-free investments are looking better than ever for the wealthy. SOUNDBITE: GARY SCHATSKY, PRESIDENT, OBJECTIVEADVICE.COM (ENGLISH) SAYING: "Municipal bonds are a lot more attractive now. The higher the tax rates go, the greater the enticement and advantage of getting tax-free income". Investment advisers add that it's more important than ever now for people in the top tax bracket to contribute the most they can to their retirement accounts because those contributions are fully tax-deductible.