Monday, October 4, 2010

Speaking of Taxes, Part VI - What's Next?

What can possibly be next? Another earnings season, elections, terror travel warnings, Holiday hiring, are all coming into season but before we rush to that, let's consider that the run up of last month needs first to be digested, or that, for better or worse, October is a month for planning.

Profits to be taken, losses to be shed. Tax planning is important for a trader and investor both. Especially since this year may mark the last for the most favorable capital gains tax we've had in decades and regardless of the type of trader or investor you may be, it's important to start finalizing your tax strategy. Planning for the event starts at filing of the last return and gets adjusted during the year; but if you have not started, it's important to at least have a grasp of your standing and get familiar with the pros and cons of your choices. You have until the end of December to carry out the plan.

This is also the last year of the zero capital gains tax if your income is low enough. It has been in effect for the last 3 years, but usually, regardless of income, minimum capital gains tax applies and this tax may not be kept going forward. In addition, I am not totally convinced that low tax rates and the previous tax cuts will carry on, although it would be wise to continue them. Politicians have their own agenda and lame duck or not, they usually decide on tax cuts and raises somewhere around Christmas Holidays when they also sneak in their pay raises. Most tax payers don't pay attention then. Maybe this year will be different, but different for who, one cannot guess, and perhaps you cannot gamble on the chance or the change.

Happy Trading, Living and Dancing

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