To recognize capital gains,
or not to recognize capital gains,
that is the question.

2021 may be the exception to the standard practices of deferring long-term capital gains, holding assets until death triggers a stepped-up basis, or gifting real estate/business interests when beneficiaries attain a certain age.

Why suddenly turn the page on these tenets of tax planning?

Because if Congress doubles the tax rate from 20% to 39.6%, as many expect, or eliminates stepped-up in basis at death – thereby incurring gains the day before death – 2021 may be the time to recognize capital gains and pay the lower tax.

My suggestion: Run the numbers, evaluate future investment appreciation, and consider ways of minimizing or even eliminating state taxes – like changing your domicile to Florida before you sell.

But most of all, keep an eye on legislation that would increase the long-term gains tax and the timing of a possible tax hike; President Biden’s proposal is effective April 28, 2021. Two variables to watch: Will Congress pass the tax hike and, if so, when does it become effective?

This article was contributed by Rita Gatta of Tandem Wealth Consultants, an Asset Vantage customer. 

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