Beginning in 2013, long term capital gains tax will increase
from from 0% to 10% in 2012, to 15% to 20%
in 2013. Add in the 3.8% Medicare surcharge and now your effective rate on long
term gains can be 23.8%. Even worse, short term gains and ordinary investment
income from dividends, interest income, etc. can be taxed as high as 43.4% in
taxes (39.6% tax bracket plus the
Medicare surcharge). This doesn't even
figure in any taxes to your state nor any penalties that may apply from the
"Affordable (Health) Care Act" in future years.
So it might be time to consider selling any stocks with
gains by December 31, 2012, even if you want to stay in the same stock. You can repurchase the stock immediately after
your sale. The disadvantage – you’re
paying taxes today with today's dollars.
The advantage – you’re paying taxes at the lower tax 2012 rates and, if re-investing in the same or any
other stock, you will have a stepped up basis for all future gains. This will
minimize future taxable gains at future HIGHER tax rates.