Death and taxes
Ben Franklin definitely had it right when he said that nothing is certain except death and taxes. And you can be sure that as we get closer to the end of the year, we’ll hear lots of discussions on tax planning.
Usually, we read about potential tax legislation along with warnings to avoid making any major financial decisions until the ink is dry. But is this time different? As Laura Saunders stated succinctly in a recent Wall Street Journal article, “tax increases are coming.”
Exactly when that will happen—and specifically for whom—is not yet so clear. Discussions are popping up around shifting strategies to reap gains and recognize income now, rather than defer into a year when tax rates may be higher. This is particularly a consideration if you have capital losses (who doesn’t?) to offset long-term capital gains. And if you’ve been making large pre-tax contributions to a 401(k) or IRA, you may want to consider whether the income deferral is going to end up costing you in the future.
One of the basic tenets of tax planning is to defer gains as long as possible. This keeps you from paying taxes now and might open up opportunities should the tax picture change down the road. For some of us, however, the picture is shifting again, and we might be better off with a strategy of recognition rather than deferral.
Who knows? Your tax professional, we hope.
Are you making any moves in light of the looming rate increases for some taxpayers?
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Interesting. Thanks for the heads-up. There’s a whole mysterious world out there with regards to tax loss harvesting — what’s okay and what isn’t. An article on this would be helpful. Thanks.
Discussion of 2010 Roth IRA and desirablility of rolling over traditional IRA and taxes now vs. later.
The tax man is a coming!!
I have significant capital loss carry forwards due to the $3000 annual limit. Can these carry forward losses be used to reduce the tax due on an Traditional IRA conversion to a Roth IRA? This may be something to address in the upcoming online seminar on Roth IRA conversions.
The reasonable approach by our government would be to shift taxes from income to consumption. That way our country gets more competitive globally by encouraging saving and investing instead of spending. Is anyone preparing their portfolio for that possibility?
The issue is death AND taxes. Those who are smart enough to accumulate an estate large enough where inheritance taxes are significant should also be smart enough to have life insurance to pay those taxes.
As we get older, life insurance is no longer important to provide a source of income to dependents. Instead, it become important to pay the costs of dying: care not covered by Medicare, a funeral, and settling the estate. It becomes very important for some of us for paying inheritance taxes so that the estate is not impacted.
I have no sympathy for those who lament that “death taxes” cause the breakup of a family farm or the sale of a family business. Those who actually experience such impacts are victims of a decedent who failed to plan ahead.