Tax Gain Harvesting, Part II: A Word on State Taxes

Ahead of time it had been presented as a boring federal budget but deep within the hundreds of pages of documents, there are some items that have the potential to cause potential problems for the financial markets.

At this point, it looks like capital gains taxes are going up tomorrow. For all investors, the rate will climb to 20 percent (after holding at 15 percent for the past decade).  For investors with more than $200,000, the rate will jump to 23.8 percent. Aswath Damodaran, the legendary professor of finance at NYU's Stern business school, has a new blog item on how he's adjusted his portfolio accordingly. 

Over the years, Warren Buffett has gotten a lot of miles out of his folksy charm and ability to distill elaborate financial concepts into plain English. And recently, proponents of higher tax rates for the wealthy have gotten a lot of miles out of those qualities too — as the world’s fourth richest man has advocated repeatedly for just that policy. This week, Mr. Buffett was at it again — this time in the New York Times Op-Ed section — calling for, among other things, a higher capital gains tax rate.

By James Kwak Some people have been claiming that Marc Zuckerberg is subject to a high tax rate, with Robert Frank even claiming, “Mr. Zuckerberg’s tax bill will also provide an important counter-point to the notion that the rich pay lower tax rates than the rest of America. That may be true for professional investors and private-equity chiefs, but not for dot-commers and many entrepreneurs.”

By Kevin Feldman: My colleague Sue Thompson recently pointed out that “investment losses are not always a bad thing,” and she described how investors can benefit from tax loss harvesting—selling money-losing investments in order to decrease tax liabilities.

Kevin Feldman submits: Yes, you read that correctly. When it comes to investing, there aren’t many times when zero is the number you’re hoping to see. However, when it comes to paying taxes on your investments, it doesn’t get much better.

(goodiesfirst)

ByScott Bilter: Most tax savvy investors are familiar with the concept of harvesting losses is order to reduce their tax bill. Potential changes on the horizon to capital gains tax rates should have investors thinking about a different kind of strategy that might make sense for some of their long held assets - harvesting gains.