Hi everyone,
so I was watching the election coverage last night and I saw Obama's speech in Houston. The guy seems to be on a roll and I believe that he has a good chance to win the general election In November. (I am neutral in this election since I can't vote, so I am neither for nor against Obama, Mc Cain or Clinton, at least for the purpose of this thread).
But I couldn't help but notice how his proposed fiscal policies seem to have high earners and investors squarely in the crosshair. Things that seem to be on the table include Bush's tax cuts, the SS tax cap and the 15% tax on dividends and LT capital gains.
Now, my taxable portfolio is fairly tax friendly as it is (mostly equity index funds with low capital gain distributions). But it is also loaded with funds paying large qualified dividends (taxed at 15% right now). My goal in placing these funds in my taxable account was to bring up my cost basis while paying the lowest amount of taxes possible. If the tax on dividends and capital gains was to go up however to 25% or more, I am going to have to replace these funds with more tax efficient ones and move the dividend paying funds to my IRA.
Another thing I am contemplating is the possibility of moving my emergency fund from Vanguard's Prime money market fund to one of their tax-exempt MMF. (I am right now in the 25% tax bracket, but if the Bush's tax cut were to be eliminated, tax-exempt MMFs would start to look attractive).
There is not much I can do to lower the hit to my earned income however. We are already maxing out retirement accounts, we have very few deductions and we are bound to have even fewer as the AMT is catching up with us.
So what step, if any, would you take to shelter your finances from higher taxes?
so I was watching the election coverage last night and I saw Obama's speech in Houston. The guy seems to be on a roll and I believe that he has a good chance to win the general election In November. (I am neutral in this election since I can't vote, so I am neither for nor against Obama, Mc Cain or Clinton, at least for the purpose of this thread).
But I couldn't help but notice how his proposed fiscal policies seem to have high earners and investors squarely in the crosshair. Things that seem to be on the table include Bush's tax cuts, the SS tax cap and the 15% tax on dividends and LT capital gains.
Now, my taxable portfolio is fairly tax friendly as it is (mostly equity index funds with low capital gain distributions). But it is also loaded with funds paying large qualified dividends (taxed at 15% right now). My goal in placing these funds in my taxable account was to bring up my cost basis while paying the lowest amount of taxes possible. If the tax on dividends and capital gains was to go up however to 25% or more, I am going to have to replace these funds with more tax efficient ones and move the dividend paying funds to my IRA.
Another thing I am contemplating is the possibility of moving my emergency fund from Vanguard's Prime money market fund to one of their tax-exempt MMF. (I am right now in the 25% tax bracket, but if the Bush's tax cut were to be eliminated, tax-exempt MMFs would start to look attractive).
There is not much I can do to lower the hit to my earned income however. We are already maxing out retirement accounts, we have very few deductions and we are bound to have even fewer as the AMT is catching up with us.
So what step, if any, would you take to shelter your finances from higher taxes?