Should I take my capital gains this year?

Question

I am expecting to be in a higher tax bracket for the next 10 years (considerably higher). I intend on selling some mutual funds within the next 2 weeks (roughly $30K in gains). Should I take my gains this year while at a lower bracket or wait until January so I can postpone paying taxes on those gains until April 2008?

It is true capital gains (long-term) would all have the same tax rate. But the profits from the gain increase your income and can bring someone up a tax bracket.

Answer 1

Its generally not a good idea to accelerate gains for tax purposes. But if you're certain you will be in a substantially higher tax bracket, then go ahead.

Answer 2

If you have held onto those mutual funds for more than a year, then selling them would trigger a long term capital gain. The tax rates on long term capital gains are capped, and will be generally lower than your marginal tax bracket. Therefore, it wouldn't really save you more on taxes if you sold now instead of selling them in the future when your tax bracket is higher.