Tax Planning

"There are two systems of taxation in our country; one for the informed and one for the uninformed...Over and over again Courts have said there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich and poor, and all do right, for nobody owes any public duty to pay more than the law demands. Taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant."

--Honorable Learned Hand, US Appeals Court Justice

Tax planning is an essential part of everyone's financial plan. Whether you are managing a portfolio worth millions of dollars, or just barely making ends meet, it is essential that you consider the tax implications of your actions. Finding ways in which to legally and prudently minimize your individual tax burden through proper tax planning should be a primary objective. We've started a collection of great articles about tax planning. If you find that the topics aren't sufficient for your needs, we suggest that you contact us regarding our premium package.

How to Sell Highly Appreciated Assets and Pay No Tax

Last Updated (Tuesday, 15 July 2008 13:26)
Written by Scott Slater

Did you know that for 2008 and possibly 2009 – 2010 you can sell assets that will generate long term capital gains and pay no tax! The law allows taxpayers to pay 0% on capital gains whose taxable income is inside their 15% marginal tax bracket.

This means for 2008 married couples filing a joint return whose taxable income is under $65,100 and includes long term capital gains, will not pay tax on those long term capital gains. Single tax payers would need to be under $32,550 including long term capital gains to take advantage. In addition to long term capital gains, qualified dividends are also taxed at 0% if taxable income is inside a taxpayers 15% margin.

Avoid Capital Gains on Highly Appreciated Assets

If your income is above these margins, consider making a charitable gift or maximizing your retirement contributions to reduce your taxable income in the same year you have a long term capital gain. Investing in tax deferred assets will also help maximize this tax strategy.

This law is set to expire at the end of 2010 but that could possibly change with the elections this year. Record deficit spending is putting pressure on Washington to raise revenue and the capital gains tax will probably be in the cross hairs first. If the capital gains rates do go up, that could precipitate a selling spree in the equity markets which could decrease their value for a time, wiping out any tax benefits.

Also, there are some special nuances to be aware of so consult your tax professional first or call our office and make an appointment to see how we can incorporate this and many other tax saving strategies into an overall plan that will give you more to live on. Please don’t forget to pass this article on to friends and family that may benefit from this special tax benefit.

Scott Slater is an Associate of Brock and Associates, LLC, a financial planning firm that specializes in retirement, estate, and tax planning.

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