New Tax Law Creates Planning Opportunities
May 22, 2006
Along with some temporary AMT relief, the tax law just passed last week extends the long-term capital gain tax rates to 2010.
Folks in the 10 and 15% tax bracket will benefit the most (assuming those same folks have investments held outside of retirement accounts). For 2006-2007, long term capital gain rates will stay at 5%. In 2008, the long-term capital gain rate drops to 0% and will remain there through 2010.
Taxpayers in higher tax brackets will pay 15% on long-term capital gains from now through the end of 2010. After 2010, the long term capital gain rates are expected to go back to the previous levels (10% and 20%).
This creates some planning opportunities for the next few years. If you’ve been holding onto stocks that have a low cost basis, depending on which tax bracket you’re in, you’ve got several years to reduce those positions and enjoy a low tax bill in the process.