Capital gains rates more favorable for 2008?

[audreyh1]

Nice tax chart - thanks!

Boy, things really go backwards in 2011.

Audrey

[justin]

Quote:

Originally Posted by lazyday You probably already have this handy table from Fido: http://personal.fidelity.com/plannin.../fidmatrix.pdf

I just realized that I'm going to get tax-screwed in 2011. As a member of the married with 2 kids, upper end of the 15% bracket tax payer, I'll be paying thousands more in taxes in 2011. The marriage penalty is reinstated (which means I'll probably end up in the 28% bracket, and I'm getting a smaller standard deduction). The child tax credit gets cut in half to $500 (x 2 kids, maybe 3 kids by 2011). On top of that dividends and cap gains will be taxed at the former higher rate.

[MasterBlaster]

Quote:

Originally Posted by justin I just realized that I'm going to get tax-screwed in 2011. As a member of the married with 2 kids, upper end of the 15% bracket tax payer, I'll be paying thousands more in taxes in 2011. The marriage penalty is reinstated (which means I'll probably end up in the 28% bracket, and I'm getting a smaller standard deduction). The child tax credit gets cut in half to $500 (x 2 kids, maybe 3 kids by 2011). On top of that dividends and cap gains will be taxed at the former higher rate.

well yeah... but we need that money to pay for the SS and medicare of the boomers !

Thanks Justin for doing your part !

seriously though, congress will probably enact legislation to (somewhat) ease the burden on middle class families. Otherwise all of the democrats will be kicked out of office in the first election after the new tax rates take effect.

This is balanced (of course) by the growing budget problems and the looming problem of paying for the boomers entitlements. Stay tuned for the outcome...

[justin]

Quote:

Originally Posted by Masterblaster well yeah... but we need that money to pay for the SS and medicare of the boomers ! Thanks Justin for doing your part !

Hmmm... don't count your chickens before the eggs hatch! 2010-2011 happens to coincide with a period where it makes sense for me to switch career tracks to a much less demanding and lower paying job at the State. I might do that just to spite the government! Knowing that I only get to take home 57% of every dollar I make (at the margin) isn't very motivating for me to earn more and work hard. Maybe DW can quit working or we'll both go part time. Decisions, decisions...

[JohnEyles]

Quote:

Originally Posted by teejayevans Yes, people might sell to take some money off the table, but this only applies to long term capital gains, and most likely the money would just get put back in, so transactions will be up, but it will end up being a wash ...

Of course, many of us make take advantage of the low rates to move out of high-expense
funds into low-expense/index ones. So, for example, I'd be moving money out of
American Funds News Perspective into Vanguard Total Int'l. If this trend is widespread,
perhaps the price of "expensive" funds goes down, but index funds wouldn't move
(since they're tied to the index). Just a thought. Maybe smart money is to have all
your ducks in a row and place your orders after you get home from New Year's Eve party

[justin]

Quote:

Originally Posted by RustyShackleford So, for example, I'd be moving money out of American Funds News Perspective into Vanguard Total Int'l.

I'll be dumping a bunch of american funds in 2008-2010 as well to move into my vanguard index funds. After getting many thousands of dollars in cap gains this year on the American Funds funds, I'm starting to appreciate the tax advantages of index funds. Especially when the cap gains rates will be going up in 2011.

Here's something to remember for you folks with state taxes - you'll still be paying the full marginal state income tax rate on those capital gains that the fed is charging you zero on. For me that is 7%! Not a free lunch, just a reduced price lunch.

[dmpi]

Quote:

Originally Posted by samclem I also think that people may begin to sell securities to take advantage of the lower rates, which will depress prices. Once the selling starts, it could be ugly.

I think that most people will sell and then buy back the very same stock.
I remember last time they raised taxes; Schwab had a deal where you could sell & buy right back with one commission. They would also guarantee you the same price for buy and sell. Mighty generous of them for doing basically nothing!

[HFWR]

Wouldn't the wash sale rules apply to this strategy?

[Behan]

That wouldn't apply here since this is about paying lower capital gains tax on profits. The wash rule is for sales at a loss. So you can't recognize the loss if you sell a stock at a loss, and then buy the same (or nearly same) stock back within 30 trading days before or after the sale.

[HFWR]

Never mind...

[Nords]

Quote:

Originally Posted by lazyday You probably already have this handy table from Fido: http://personal.fidelity.com/plannin.../fidmatrix.pdf

Ooooh, that's excellent, thanks.

I've never used the Fidelity planners... I'm ER'd, college is planned for, FIRECalc does a better job, and I already know where to find a good surf forecast.

But now I'm going to have to take another look!

[lazyday]

You're welcome, Audrey and Nords.

Too tell the truth, I thought I may have picked that link up from you, Nords!

[Nords]

Quote:

Originally Posted by lazyday Too tell the truth, I thought I may have picked that link up from you, Nords!

Well, judging from my awareness level around here the last few months, you may be right...

I just hope that when I file this printout it's not sitting right next to one that I printed out last year.

Whew, OK, it's the first time I've printed it.

[samclem]

Great chart--thanks.
The estate tax changes before and after 2010 are an eye-opener. If you are worth a lot of money, it might not be a good idea to go rock climbing or hunting with Junior in 2010. No sense in tempting him.

[LOL!]

Hmmm, it looks like this 0% cap gains rate will force me to retire in 2008.

It reads like we can work a few weeks in early 2008 and fill up our 401(k)s leaving just a couple thousand in taxable income. Then realize LT cap gains, take the child tax credits, convert some IRAs to Roths and meet you on the beach.

I guess I just don't understand what our lawmakers were thinking. I must not have this correct.