Tax Moves to Take Now
Big changes may come to income taxes next year. The media is
full of discussions of the "fiscal cliff" and what lies ahead. At
this point no one knows for sure what changes are in store.
Rates for ordinary
income, dividends or capital gains could rise, perhaps even substantially. Some
deductions could be curtailed. Inheritance or other taxes could be revamped.
With this backdrop, there's a danger that investors will over react and take
actions that could damage their financial futures. But everyone should at least
consider some measures before year-end.
For one thing, investors should focus
on the possible rise in capital gains tax rates. If one has long-held positions
with big gains, particularly if the holdings are in one or two stocks, now is a
good time to consider realizing those gains at the low current rates and
diversifying your portfolio.
Everyone who is eligible for a Roth IRA or Roth
conversion should at least consider it. And anyone who has a retirement plan at
work or who could institute one should utilize it as fully as possible
depending on their personal circumstances.
We don't know
what the future holds but we should prepare as best we can.