Smart Tax Moves Before Year-End

Our clients know that toward the end of each year, we review non-retirement portfolios looking for opportunities to harvest capital gains and losses. 

This year, that task will have a heightened importance, as capital gains tax rates are likely to rise next year from their historic lows.

At present, capital gains tax rates range from a low of 0% (for lower income taxpayers) to a maximum of 15% (for the highest income taxpayers).

Next year’s rates depend, of course, on Congress and the outcome of the elections, but it’s a good bet that taking capital gains will be costlier come 2013.

The most likely scenario is that capital gains rates will rise to 20% for many taxpayers and 23.8% for the highest earners (that 3.8% bump upwards is due to the Medicare surtax).

That makes December 31 the deadline to harvest gains at today’s low rates.  Keep in mind that taking gains this year can be beneficial for even lower income taxpayers, as this year’s 0% rate could disappear next year.

Parting Shot: What are we looking for when we review portfolios for capital gain or loss candidates? Often it’s holdings that are not performing as expected, although it could also be investments that have done too well and need to be cut back. We may be making changes to your overall allocation based on strategic considerations, or we may be responding to changes in your financial circumstances (for example, your recent retirement means you now need more income, or perhaps you need to raise funds to cover upcoming expenses).


About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!


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