The New Year is in full swing and tax day is less than two months away! January 2008 heralded in a zero percent capital-gains tax rate for those in the 15 percent federal income tax bracket or below.
Clients can enjoy the Tax Increase Prevention and Reconciliation Act (TIPRA) blitz through 2010, allowing advisors to provide exceptional planning opportunities for years to come.
Thanks to TIPRA, taxpayers in the lowest federal income-tax bracket will pay no capital gain income taxes on long-term investment assets sold from 2008 to 2010. Not to be overlooked, middle-class taxpayers, or clients within the 10 percent and 15 percent federal income-tax bracket, will have the chance to sell low-basis investments without incurring a tax bill.
The 2008 laws offer new planning options that will give clients an edge and may allow them to gain on their investments without incurring a capital-gains tax.
Clients often hesitate to liquidate their investments because of tax consequences. But, selling appreciated investments will let clients:
- Reset the cost basis in the position.
- Diversify by relocating proceeds into different asset classes.
- Provide a source of tax-free cash flow.
- Guard against future increased tax rates, if the rule is repealed.
- Increase cash reserves for use in both emergencies and opportunities.
- Provide funds used to obtain long-term care insurance.
These rates are set to be available for several years, but may be limited by the upcoming election year. So – seize the moment to educate your clients. Make taking advantage of these opportunities your New Year’s resolution.
