Reacting to new tax structure

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Beagler
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Reacting to new tax structure

Post by Beagler »

With a new 3.8% Medicare tax on investment income (from what I gather, starting in 2013 the new tax would apply to income from interest, dividends, annuities, royalties, capital gains and rents for individuals who earn more than $200,000 annually and joint filers reporting more than $250,000; from what I've read it would also push tax rates on capital gains and dividends that year to 23.8 percent for high-income people), how (if at all) are Board members going to alter their investment approach?
“The only place where success come before work is in the dictionary.” Abraham Lincoln. This post does not provide advice for specific individual situations and should not be construed as doing so.
ResNullius
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Post by ResNullius »

I'm going to do everything I can to make sure my AGI is under $250K for myself and my wife. Given that we're mostly retired, I think we'll be able to do that. When we actually stop everything and start on SS, I'm sure we'll be able to do that. Right now, the plans are to leave the 15% rate in place on cap gains and qualified dividends for those under the AGI limits. Let's hope so anyway.
Snowjob
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Post by Snowjob »

When I quadruple my income to the 200K level I'll let you know :wink:
kiaseduniai
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Re: Reacting to new tax structure

Post by kiaseduniai »

I will do whatever it takes to keep our AGI below 250k, fortunately that won't be hard :)
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Doc
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Post by Doc »

ResNullius wrote: Right now, the plans are to leave the 15% rate in place on cap gains and qualified dividends for those under the AGI limits.
I'm just keeping my powder dry until congress acts. (All new money or investment income is going into short term high quality bonds.) The final bill, if any, may not look anything like the budget proposals.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
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Opponent Process
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Post by Opponent Process »

We will also strive to make something of a living (if you can call it that) on less than $250,000 a year. I guess it's back to beans and rice.
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indexfundfan
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Post by indexfundfan »

Don't waste your time typing too long a reply. A few threads on this issue have already been deleted.
My signature has been deleted.
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Doc
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Post by Doc »

indexfundfan wrote:Don't waste your time typing too long a reply. A few threads on this issue have already been deleted.
If the bill is signed, the tax increase is law. Tax efficient investing has always been a legitimate Boggleheads attribute. It is not political unless you start criticizing/supporting the law itself.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
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indexfundfan
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Post by indexfundfan »

Doc wrote:
indexfundfan wrote:Don't waste your time typing too long a reply. A few threads on this issue have already been deleted.
If the bill is signed, the tax increase is law. Tax efficient investing has always been a legitimate Boggleheads attribute. It is not political unless you start criticizing/supporting the law itself.
I agree with you but this is not my view. Here's what admin said:

Proposed legislation (in this case the reconciliation package) is OT on this forum - we can revisit the issue when all the dust has settled.

A few other threads had already been deleted.
My signature has been deleted.
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market timer
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Post by market timer »

The legislation only makes my $200K in carryforward losses that much more valuable. My balance sheet is so F'd that my interests are aligned with the average voter.
Levett
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Post by Levett »

I'm not a member of the Board, but I confess I'm bored. Bob U.
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ryuns
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Post by ryuns »

market timer wrote:The legislation only makes my $200K in carryforward losses that much more valuable. My balance sheet is so F'd that my interests are aligned with the average voter.
Whoa, so times are really tough, eh?
An inconvenience is only an adventure wrongly considered; an adventure is an inconvenience rightly considered. -- GK Chesterton
InvestingMom
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Post by InvestingMom »

I read a bit about this too and wondered exactly how it works. So once your AGI hits the 200/250k threshold, then does the tax kick in for every dollar of investment income above that? Does "earned"mean earned income? or AGI?

What if you had wages from work of 200K (and single) and 50k of investment income. Does the 3.8 apply to the 50K? What if you had wages of 50K, and capital gains of 300K, then does the tax apply to 150K of the capital gains (300+50=350-200=150) or zero because earned income is only 50K?

I hope they don't delete the thread....as long as we don't advocate one way or another, it seems relevant.
sscritic
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Post by sscritic »

InvestingMom wrote: I hope they don't delete the thread....as long as we don't advocate one way or another, it seems relevant.
It's not law yet. You are talking about aspects of the reconciliation bill that just made it to the senate today and won't be the subject of debate there until later in the week. When the bill (the reconciliation bill) is signed by the President, you will have plenty of time to sell all your stocks, change your will, etc., but until then, just relax, take a deep breath, and wait.
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