Control and Planning

I have seen an uptick in questions about year-end and pending tax increases. These range from “should I sell everything this year to avoid the potential rise in capital gains taxes,” to “will offshore accounts give me more tax savings,” and “what impact will the new healthcare tax have on my business” to “will I be eligible for a low cost mortgage plan.”

While all of these are legitimate questions, I often encourage people to step back from the emotion and focus on your goals. Planning should not be done based on what may happen, but rather with contingency plans that could be implemented should something happen.

So let’s look at some practical items you may want to consider as the presidential election nears.

First, in regards to capital gains, take an inventory of the stock you have held long term. If you want to continue to hold them, if it becomes  clear that capital gains will increase, sell them and buy an index to hold the position and then repurchase after the required holding period has expired. (There is a penalty for selling and repurchasing right away, consult your broker for more details.)  If you plan on using the investment for charitable giving you may want to wait and if the rates increase you will receive a greater deduction for your contribution.

Healthcare is a different question. It is still evolving and the news is not good. I expect costs to rise for everyone regardless of what happens in the election. I guess that means less time out at restaurants. Small businesses will have to deal with more regulation and insurance companies will struggle to find ways to cover everyone. Both will increase cost and have to be paid somehow.

Finally mortgages are at all time lows. If you have not refinanced your house, do so. There are many programs that will even refinance underwater mortgages and the change in your monthly cash flow could be significant. Take advantage of these as soon as possible. Eventually interest rates will rise and you will wish you had refinanced your house.

The bottom line is that there is a lot of uncertainty and little you can do about it, but by having clarity on what you want to accomplish you can develop a plan to implement should fears become a reality.


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