Preparing for Higher Taxes
Current Trends
According to the Tax Policy Center, more than 40% of the adjusted gross income of
high net worth individuals in the U.S. was realized through capital gains in 2006.
According to the Tax Foundation, capital gains tax rates in the U.S. today are among
the lowest in U.S. history. While there have been several proposals put forward
in the last few years by ranking members of Congress to extend existing capital
gains tax rates, they have all been ignored as a result of the recent U.S. federal
and state fiscal crises brought on by a combination of the global financial crisis,
financially troubled social insurance programs, expenditures on the wars in Afghanistan
and Iraq, and the servicing of existing U.S. federal debt obligations.
On December 31st, 2010 the tax cuts and incentives enacted during the previous white
house administration are set to sunset. Unless Congress acts otherwise, U.S. capital
gains tax rates will revert to their substantially higher 2000 levels in 2011. High
net worth individuals looking to realize their capital gains in 2011 may be taxed
at the new 36% and 39.6% top two highest federal income tax brackets for short-term
capital gains (STCG), or at the new 20% long-term capital gains (LTCG) tax rate.
Between federal, state, and local capital gains taxes, high net worth individuals
may lose between 25% and 50% of their capital gains to taxes as a result of these
and other changes.
By engaging in our tax planning services, high net worth individuals may reduce,
defer, or eliminate their capital gains tax liability.