Articles from The Mediator
Unusual Tax Advice: Better to Pay Now?
The conventional wisdom is usually that if a tax is due, it is better to pay it later than sooner. But such advice is being stood on its head this year because of the possible expiration of the Bush-era tax cuts.
These cuts lowered the Federal tax on long-term capital gains — profits from investments held more than one year — to 15%. If Congress fails to act shortly, this tax rate will automatically go back up to 20%.
So this creates an unusual decision for those holding profitable long-term investments which they plan on selling in the near future: sell now — and pay a tax now — or sell later and pay what many believe will be a higher tax later. This becomes especially crucial if the gain, and therefore the tax, would be large.
While every situation is different, some of the financial professionals interviewed for this newsletter are advising some clients to consider selling now to avoid higher taxes later.