Newspaper article THE JOURNAL RECORD

GOP Victory Necessitates Re-Examining Tax Strategies

Newspaper article THE JOURNAL RECORD

GOP Victory Necessitates Re-Examining Tax Strategies

Article excerpt

Houston Chronicle

HOUSTON _ The Republican landslide in last week's elections has suddenly made year-end tax planning a lot more interesting.

Republicans say they want to give us more tax breaks and, for savvy investors, tax changes bring opportunities.

The potential changes that appeal most to individual taxpayers involve reductions in capital gains taxes and increased eligibility for deductions for contributions to retirement accounts.

From a planning point of view, much of the drama will center around the timing of gains and losses on investments.

Capital gains are the profits you make on an investment when you sell it for more than it originally cost. Currently, the top tax rate for long-term capital gains is 28 percent.

If you can afford to and don't immediately need the money from a capital gain, you should postpone taking it until next year, when the tax rate may be lower.

"If you have a choice, why not wait and see what happens?" said Hubert Hawthorn, a financial planner and accountant at Dillashaw, Hawthorn Co. in Houston.

"If these new rules take effect, it's a pretty safe bet that whatever the rules are, (the climate) should be more favorable for capital gains than it was in 1994," said J. Harold Williams, a partner at Linscomb Williams in Houston, a financial advisory firm.

But as the saying goes, "Don't let the tax tail wag the investment dog." You should never sell your investments just for tax purposes.

"If you have a stock that tends to be very volatile in price and fluctuates widely and maybe has been at the high end of the range, one would have the concern that, `If I wait, this thing may drop,' " Williams said.

"I may save some tax, but I lose the profit that I make." However, if you own a more stable stock, "you might think, `It may drop but it probably won't drop that precipitously. I might take my chances and wait,' " Williams said. "It just depends on the nature of the stock. …

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