TRUCKEE, Calif. - You may have heard a lot of talk lately regarding the "Fiscal Cliff." Quite a bit of the information out there is highly charged partisan political vitriol. The Fiscal Cliff is sure to be a contentious political issue before and after the November elections.Investors need to be aware of the implications that the Fiscal Cliff could hold for them and be aware of any changes made after the elections. While we can't predict the outcome of the election or tax policy changes post election, we do need to be aware of what is scheduled to occur if no action is taken.The Fiscal Cliff is defined as an expiration of several tax breaks at the end of 2012. If we "fall off the Fiscal Cliff" - that is if no action is taken on these expiring tax breaks - taxes will increase by an average of about $3,500 per year per household. That's equivalent to the average family taking on a new bill of $300 per month just for tax increases.According to a study by the Tax Policy Center, the Fiscal Cliff consists of six components. First are the Bush tax cuts from 2001 and 2003 that were extended in 2010 but will expire at the end of 2012. Second we have the temporary tax cuts that were part of the ARRA, the American Recovery and Reinvestment Act of 2009. Third, Congress has not acted on several temporary tax breaks that are usually extended. Fourth, the payroll tax cut is set to expire. Fifth, the new taxes in the ACA, the Affordable Care Act, will begin in 2013. Lastly, the AMT patch expired in 2011, so millions of taxpayers may be subject to the AMT or alternative minimum tax.Investors will be affected in the following areas - the long term capital gains rate will increase, the dividend tax rate will increase, Muni bond investors may be subject to the AMT and the estate tax will increase with substantially lower limitations. The long term capital gains rate will increase from 15 percent to a maximum of 25 percent for high income investors. The dividend tax rate will go from 15 percent to a maximum of 39.6 percent. Municipal bond investors who are not subject to the AMT could become eligible and see a decline in their after tax income. If you have a sizable estate, 2012 could be one of the best years to do some gifting as the estate tax rates will increase and the exemptions will be lowered.Kenneth Roberts is a Truckee based Registered Investment Advisor. Information on his money management service can be found at www.fusiontargetretirement.com or by calling 775-657-8065. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.