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Abstract: 

While predicting new tax policy in the current political climate is difficult, capital gains tax rates likely will rise in 2013. For investors, taking gains before tax rates increase could be advantageous on balance—their liabilities would arise sooner, but investors would avoid paying taxes at future years’ higher rates. Conversely, by waiting to sell, investors could postpone capital gains realizations and benefit from additional compounding of returns on deferred taxes, albeit at the expense of paying taxes at higher rates in the future. This analysis and recalibration reviews the quantitative conditions investors and their advisors should consider in deciding whether to realize capital gains sooner or later.

Keywords: capital gains, capital gains taxes, 2013 tax rate changes, capital gains and state and local taxes, break-even calculation

Affiliations:  1: Rockefeller Financial.