Consider recognizing capital gains this year, by Tim Steffen, CPA, CFP, financial and estate planning manager at Robert W. Baird & Co.
Tax cuts enacted by the Bush administration nearly a decade ago are set to expire at the end of the year, creating uncertainty – as well as opportunity – for investors looking at year-end tax planning strategies.
If the cuts expire without Congressional action, virtually all taxpayers will see an increase in federal income taxes next year. Given what we know now, choosing to recognize a capital gain this year instead of next may make sense for some investors.
The top tax rate for long-term capital gains in 2010 is 15 percent, and there is no tax on gains for couples with income below $68,000 (single taxpayers below $34,000). Those rates are scheduled to increase to 20 percent and 10 percent, respectively, for long-term gains realized after 2010. President Obama proposed maintaining the current rates for most taxpayers, while raising the rate to 20 percent for couples with income over $250,000 (singles over $200,000). However, no legislation has been introduced yet.
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