It's a sure thing that taxes are going to increase in 2011. With a projected $1.8 billion budget deficit and some form of healthcare reform a strong possibility, the government is going to be looking to raise more revenue. States are also cash-strapped and will be raising taxes (some states like Massachusetts have already increased sales taxes).
As a result, it may no longer make sense to defer capital gains. If you have an investment you've been thinking of selling, now may be a better time then next year. If your state is having financial problems and has a low income tax, you may want to make big-ticket purchases now, before the sales tax goes up.
Consider this: long-term capital gains tax rates at 15% are at their historical lows. President Obama has already mentioned raising this to 20% and don't be surprised if the final number is even higher. If you are in a higher-income tax bracket ($250,000+), then the risk of a tax increase is even greater.
According to the Wall Street Journal:
"This strategy makes even more sense for those with unused capital losses from the past year's market maelstrom, because such losses can be used dollar-for-dollar to offset long-term gains. Otherwise capital losses can offset only $3,000 of ordinary income per year, although they may be carried forward indefinitely on federal returns and in some states."
They say taxes should never be the prime reason for making an investment decision, but if you are contemplating buying or selling an investment, now may be better than later.
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