“Well, we finally have a Democratic nominee. Yes, a lot of water still has to flow under the bridge. The only thing we know for certain right now is that a new president and a new Congress will be sworn in next January,” Brett Arends reports for The Wall Street Journal. “But as Barack Obama is the man of the hour, it’s a reasonable time to ask what his election might mean for you and your family’s money.”
“This is not a political column, and in this space I take no stance about who should or shouldn’t win. I am only concerned with what you should do to prepare for contingencies,” Arends notes.
“The Bush tax cuts, which came into effect in 2003, are already set to expire in 2011. And politics, as well as the huge budget deficit, make it likely they will do so. That will probably mean big changes to the tax rates on capital gains and stock dividend income, among others. Senator Barack Obama has already acknowledged that he may be willing to raise the top rate on long-term capital gains still further, to 28%. That was the rate in 1997. Today it’s just 15%,” Arends reports.
“So if you are sitting on a huge profit in, say, your Apple stock, if the Democrats win in November you might want to cash it in before the end of the year,” Arends reports. “‘Go ahead and sell it’ says Benjamin Tobias, a financial planner in Plantation, Fla. ‘Pay the 15% tax, and put a happy face on the check to the IRS because you’re only paying 15%. Next year, who knows what you’ll be paying?'”
Arends also notes, “It’s way too early to make any moves based on the election, and you should probably seek professional advice before taking any bold steps with your money. It is also worth adding that a number of these changes might end up being brought in if John McCain becomes president as well. The one thing I am willing to say with some certainty is that the 15% tax rate on dividends and capital gains isn’t going to be cut.”
Full article, in which Arends also covers making changes to your IRAs and other tax-deferred accounts, along with moving some of your other investments into tax shelters such as low-cost variable annuities, here.
[Thanks to MacDailyNews Reader “Broker” for the heads up.]