2012 Tax Planning-Part1: REALIZING CAPITAL GAINS

The stock market has been doing rather well of late. Current maximum capital gain rates of 15 percent would rise to 20 percent in 2013 under current law. Realizing those gains in 2012 would ensure taxation at the current rates. Investors can even immediately repurchase the investments that they desire to hold for a longer period and still recognize the gain in 2012.

Of course, there are proposals to eliminate capital gains taxes entirely. Taxpayers may want to wait until after the November elections to get a better sense of which way the political winds are blowing before deciding whether capital gains taxes are more likely to rise or to fall in the future. Investors may also consider the likelihood of some companies sitting on cash to pay out a special dividend before 2013 if the law threatens to start taxing dividends as ordinary income again.

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