Planners and Clients Try to Weather Changing Tax Laws

Opiela, Nancy
December 2004
Journal of Financial Planning;Dec2004, Vol. 17 Issue 12, p36
Academic Journal
This article deals with the implications of the propose tax laws changes in the U.S., as of December 2004. As much as financial planners insist they cannot predict future tax rates, all planners interviewed agreed that it is difficult to look ahead and see income taxes declining further. Between the mounting federal deficit and the drain of the war in Iraq, something has to give. No matter who is elected president, some form of tax increase will be necessary, whether it is a national sales tax, payroll tax, or income tax, says Cynthia Sechrest, Certified Public Accountant of Sechrest Financial Services LLC. Without question, low taxes on capital gains and ordinary income present an array of planning opportunities. In fact, with capital gains taxes at their lowest rate since 1942, many planners are recommending selling stocks or real estate with big gains, says Will Taylor, chief financial planner of Farmers and Mechanics Bank. Historically low income taxes also have daily revisiting whether mutual funds or a variable annuity are most appropriate for a client. The most important assumption in comparing variable annuities and mutual funds is the future tax rate on distributions. To make annuities look good, assume that tax rates will be lower.


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