Until the last week of June, investors were waiting to see what the Supreme Court would do about the 3.8 percentage point tax on investment income – part of the 2010 health care overhaul. The new tax starts January 1, 2013 and affects joint filers that have an adjusted gross income greater than $250,000 or $200,000 for single filers. Long-term capital gains will jump from 15% to 18.8% for these earners. When the court affirmed the law, investors and tax advisors started planning and looking for answers. The IRS has not released guidance on the new law.
A New Level of Planning
Many Americans will not be affected by this new tax. However, those that do fall under the new tax guidelines will find managing their long-term gain taxes just as important as managing personal and business taxes. Assuming the law is not repealed by Congress, many affluent investors may find it advantageous to take long-term gains this year prior to the onset of the new tax. In addition, many may seek to shelter assets where the tax does not apply. These include municipal bond funds and tax deferred accounts. Bottom line, now is the time to start planning for this tax. A solid plan leading up to the new investment tax using both your investment advisor and accountant could save you thousands in taxes.
This article is written by Kevin J. McNab. Kevin is President of McNab Financial, LLC and is a CFP®, ChFC®, and CRPC®. This article is not intended to contain investment or tax advice. Please contact your investment and tax professional to discuss investments discussed in this article. McNab Financial, LLC is a Registered Investment Advisor in the State of Colorado.