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Avoiding The 2013 Capital Gains Gotcha in Virginia


Cap gains

Last year’s historically low capital gains tax rate of 15% is, well, history, but there are still ways around the new higher rates that went into effect Jan. 1st. The 15% top capital gains tax rate went up to 20%. High income earners have to tack on another 3.8% (the net investment income surtax). Look at this before year-end if you want to avoid a surprise capital gains tax bill when you file your tax return next April.

Did you know there's a new tax bite effective January 1, 2013? For example, unless you have been paying close attention to capital gains and your expected tax hit for 2013, then you might not realize the pain until tax season. For those in the know, however, there is still time to beat the capital gains tax in 2013 and beyond.

For some ideas to consider before it is too late, take a look at a recent Forbes article titled “How To Beat The Big 2013 Capital Gains Tax Hike.

The Great Capital Gains Tax Hike of 2013 was essentially the double-pronged effect of the eclipse of certain tax cuts mixed with a brand new surtax. More specifically, the gains tax was allowed to bounce from 15% to 20%, and Obamacare added to the pain with a new 3.8% surtax to high earners. If you are doing the math, then that equates to a new rate of 23.8% for many (a near 60% increase from the year then ended).

So how do you beat it?

Here are 11 strategies to consider, according to Forbes:

  1. Invest in your primary residence.
  2. Manage your tax bracket.
  3. Harvest losses.
  4. Gifts to family members.
  5. Gifts to charity.
  6. Feed retirement accounts.
  7. Open a 529 college savings account.
  8.  Buy and hold.
  9.  Move to a tax-friendlier state.
  10.  1030 exchanges.
  11.  Charitable trusts.

Each of these strategies has merit.

Nevertheless, the key is to evaluate them (and others) with your professional advisors in the context of your medium and short-term financial and estate planning goals.

The tax “tail” should never automatically control the planning “dog.”

You can learn more about this topic as well as other strategies on our website under  the tab entitled: estate planning in Virginia.  Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.

Reference: Forbes (September 13, 2013) “How To Beat The Big 2013 Capital Gains Tax
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