Lest you forget, the Bush era tax cuts are due to expire at the end of 2010 and the comfortable 15% capital gains rate is set to increase to 20%. Congress could act to set a different rate, however, letting the current rates roll back to the previous percentage has enormous appeal to those afraid to raise taxes. They can just let it happen by default.
Well, that’s only half the story. There is a new tax of 3.9% dubbed the “Medicare payroll tax” on capital gains and other investments starting January 1, 2011. Combined, the capital gains tax rate will be 23.9% beginning next year.
If ever there was a time to do some planning, it’s now. Exchanges will defer all of this but some situations will dictate a sell and pay the tax. If this is your decision, get going before the pain gets worse. Oh, and don’t forget to add the recapture of deprecation at 25% and state capital gains tax. This could make the sale subject to as much as 36-40%.
