Thrive Despite a Capital Gains Tax Increase




Key Takeaways:

The Four Capital Taxes

  • Current State of Capitals Tax (0:45): The American Families Act

  • Make more than $250,000 - 20% plus a 3.8% surtax.

  • The federal, state, local (in some parts of the country like NYC) and the ObamaCare surtax of 3.8%.

  • Income greater than $1M will see a capital gain increase from 20% to 39.6% if the proposal passes.

  • Example: New York City: 58.2% Portland, OR -57.3%.

Is This Likely To Pass?

  • Insiders feel a 28%-29% tax rate will be agreed upon.

  • The 39.6% offer might be a negotiation tactic.

  • A 39.6% + 3.8% = 43.4. We would be the country with the highest rate in the world.

Strategies To Address This Risk:

  • Quit putting huge amounts of money in your taxable bucket. You will pay tax on the dividends.

  • There are more efficient places to park your investments. Few clients take advantage of tax-efficient investing.

  • Roth 401(k) -$26,000 a year (over age 50).

  • Roth IRA (min 9:15 of the video) - $7,000 a year (over age 50) on top of the $26,000 invested in the Roth 401(k). Leave some money in the IRA so you can take advantage of your standard deductions.

  • Roth conversions.

Life Insurance as a Strategy:

  • Life insurance (min 10 of the video)- a) safe and productive growth, b) a floor so no market losses; no loss of your money, c) tax-free growth, and d) a death benefit that doubles as long-term care.

  • The Life Insurance Retirement Plan - becomes the receptacle for all the money that would normally be destined for your taxable bucket.

  • No income or contribution limits.

  • You could be impervious to the capital gains taxes.

  • No stock market risks.


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