Vice President Harris has proposed increasing the top Federal income tax rate on long-term capital gains to 28% for taxpayers making over $400,000 a year. With the 3.8% additional tax on Net Investment Income, the total Federal income tax rate for long-term capital gains could rise to 31.8%. In the two weeks prior to the election, some taxpayers are wondering whether they should recognize long-term capital gains now, in case Vice President Harris is elected president. Should taxpayers decide to sell stock this year to avoid the possible increase in the long-term capital gains rate next year?
I suggest that high income taxpayers should not sell their appreciated securities before the election merely to avoid the potential capital gains tax increase for the following reasons:
- The likelihood of a capital gains tax increase is significantly diminished if Vice President Harris is not elected president.
- Even if Vice President Harris is elected president, there is unlikely to be a capital gains tax increase unless the Democrats win both Houses of Congress.
- Even if Vice President Harris and the Democrats sweep, it is unclear when or if there will be an increase in the long-term capital gains rate.
If the Democrats win the presidency and both Houses of Congress, I will follow up this column with more comments regarding how to deal with higher tax rates on long-term capital gains after the election. For now, I advise patience until the results of the election are known.
This article is based solely on the tax consequences of capital gain recognition. It is not based on the impact of either candidate’s economic policies. Consult your tax advisor to discuss the impact on your personal facts and circumstances.
Read the full article here
