Under Northern Trust’s Capital Market Assumptions, our research shows that it may be prudent for investors to consider “up-costing” (selling today at lower rates) if funding near- and intermediate-term (1-10 year) goals.Pushing a tax liability far into the future (even if it occurs at a higher rate) may be advantageous if you do not need the proceeds to fund near-term goals. If you believe you will remain in the highest tax bracket (your taxable income will remain over $1 million) and are thinking about selling an asset to realize a capital gain and reinvest the proceeds, the power of compounding interest on the portion used to pay taxes is lost. President Biden's Proposed Capital Gains Policy Changes Below, we offer six considerations to ensure your plan can flex to accommodate changing capital gains policy and that you are positioned to confidently achieve your long-term goals. With this uncertainty in mind, many investors are trying to assess whether they should realize capital gains today or risk potential higher tax liability in the future. That is why we believe the best strategies focus on long-term goals and incorporate flexibility to adapt to changing circumstances. The final form of any future changes to tax law are uncertain, and history tells us that, even if they are made, such changes may not endure as economic and political environments shift. We continue to advise that it is far better to plan for, but not attempt to predict, potential policy changes. With changes to capital gains on the horizon, consider these strategies to optimize your plan.Īs questions continue to swirl around the scope of potential changes to tax policy, many investors are rightfully concerned about possible changes to the capital gains tax.
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