Current political talk (OK, fights) on Capitol Hill is full of discussions (OK, fights) over how and how much to tax the rich. The discussions (OK, fights) are driven by the fact that the tax code already is full of provisions that help the wealthiest among us stay that way. But some of the tax laws can help all of us, regardless of our income level, increase our relative wealth. And some of those Internal Tax Code components are adjusted each year for inflation. This Part 6 of the ol' blog's annual tax inflation series looks at how these annual... Read more →
Investing Capital Gains
Photo by Liza Summer from Pexels Investments have dominated recent money talk, on Capitol Hill and in the broader tax and financial communities. First there was the Congressional proposal to tax billionaires' unrealized gains. This approach is a change from the usual capital gains tax applied on profits when assets actually are sold. The idea was dropped (for now) during negotiations among Democrats to find agreement on their spending plan. Then the markets decided to go wild last week, with the three major stock indexes — the Dow, S&P 500, NASDAQ — all ending on Friday, Nov. 5, at all-time... Read more →
Yes, cash sometimes is called lettuce, but tax gain harvesting isn't just about more green for your wallet. It could help reduce taxes you sell on assets you sell in the future. Even if you're not among the wealthiest, if you have invested a bit, you probably keep an eye on the markets. And you probably took a long look yesterday, when the Dow topped 36,000 for the first time ever. Hey, I'm right there with you. I checked my holdings to see how much they were up at that point. We all like positive reinforcement. If you're investing for... Read more →
Congress is grappling with capital gains tax, specifically higher and unorthodox — some say unconstitutional — rates for billionaires. Meanwhile, all the way literally across the country from Washington, D.C., voters in Washington State will have their say today, Nov. 2, on whether they want to repeal their impending 7 percent capital gains tax. The tax is scheduled to take effect on Jan. 1, 2022. Evergreen State voters, however, have the chance to today to tell lawmakers they want to stop its implementation. Or keep it. Most folks tend to be anti-tax, but the money that would be generated by... Read more →
UPDATE, Nov. 2, 2021: OK, #1 in this list now is moot. But the 5 remaining November tax moves still apply. Autumn leaves in our backyard stream. (Photo by Kay Bell) You can stop staring at your calendar. October is gone, apparently roaring through 2021. Today really is the first day of November. Once you regain your temporal composure, it's time to get busy. Even though some of us started dealing with upcoming year-end festivities last month (guilty!), it's now officially holiday season. And we have to adjust to the time change. And vote. And, of course, deal with our... Read more →
As the battle over how to pay for the Biden Administration budget continues on Capitol Hill, much of the focus has been on the wealthy. A new annual tax on billionaires' unrealized capital gains is the latest suggestion to help pay for the nearly $2 trillion bill. Under current law, every property owner, regardless of income, pays tax on assets when they realize a gain from them, usually by selling them. This so-called wealth tax, however, would force the ultra-wealthy to pay tax on the value or their holdings, stocks as well as real estate, before realizing the gains. It... Read more →
These cattle out in the West Texas Big Bend area don't appear worried about much. Their owners, however, have a lot of concerns, including severe weather that could hurt their ranches' profitability. The IRS is once offering some ranchers and farmers special drought-related tax relief. (Photo by Kay Bell) I grocery shop every week and there are a few items that I always purchase. Beef is one of them. You're not surprised, are you? I am a Texan. That consistent shopping list means I get week-to-week comparisons of my regular items. And, as other shoppers have noticed, meat prices, particularly... Read more →
via GIPHY On a visceral financial level, we all hate paying taxes. But what we hate almost as much is that the tax laws often seem overly complicated or just plain goofy. Take estimated taxes. These are four extra payments that the Internal Revenue Service and many states require taxpayers to make to cover the taxes due on earnings that aren't subject to paycheck tax withholding. Straightforward enough, right? Until it comes to payment deadlines. Even though there are, in most cases, four of them and they're called quarterly estimated tax payments, the IRS uses a calendar that's a bit... Read more →
The Capitol Hill debate over how cryptocurrency taxes fit into the funding of the infrastructure bill continues. Most Americans, however, already have decided that stronger Internal Revenue Service oversight of digital asset transactions are OK. Virtual assets meet the infrastructure road: Part of the payment of the $1 trillion infrastructure measure now before the Senate would come from stricter enforcement of cryptocurrency transactions. The Internal Revenue Service considers virtual currency a capital asset, meaning potential taxes when transactions produce a profit. The agency has ramped up efforts to track virtual currency moves in recent year. A provision in the infrastructure... Read more →
UPDATE, Aug. 9, 2021: A last-minute push to limit new cryptocurrency tax reporting requirements in the $1 trillion infrastructure package (see Aug. 4 update below) failed today, despite a bipartisan agreement and a frenzied lobbying push, per The Washington Post. UPDATE, Aug. 4, 2021: In response to the concerns elaborated on in the rest of this post, a bipartisan group of lawmakers has offered an alternative cryptocurrency revenue-raising plan. The amendment was crafted by Senate Finance Committee Chairman Ron Wyden (D-Oregon) and Republican Sens. Pat Toomey (more on his complaints later in this post) of Pennsylvania and Cynthia Lummis of... Read more →
Joe Biden's campaign slogan "Build Back Better" now is part of his presidency's agenda. Many promises he made in 2020 now are part of the Biden Administration's first federal budget proposal. President Joe Biden's first federal budget proposal, which is for the 2022 fiscal year that starts Oct. 1, comes in at $6 trillion, detailed in more than 1,700 pages. The White House projects its changes will bring $3.6 trillion to the Treasury over the next decade. It also projects a $1.84 trillion deficit. That's a substantial number, up from 2019's $984 billion deficit, but a sharp decrease from the... Read more →
Washington's capital gains tax proposals have people talking. On both coasts. In Washington, D.C., President Joe Biden's call for those earning more than $1 million to pay a 43.4 percent tax on their investment earnings instead of the current 20 percent tax rate has anti-tax lawmakers and lobbyists working overtime to stop it before it gets going. That total comes from a return to the pre-George W. Bush tax cuts ordinary income tax rate of 39.6 percent plus the 3.8 percent Affordable Care Act investment income surcharge. Meanwhile, around 2,350 miles to the west, a new capital gains tax on... Read more →
One of the many reasons that people hate taxes is that after the hassle of filing, then comes the fear that a Form 1040 mistake will mean an audit. The sort-of good news for taxpayers is that the Internal Revenue Service hasn't been auditing as many people in recent years. The agency has had other things to worry about, like doing its myriad jobs with fewer staff and less money. Then there's COVID-19, with added pandemic payments that the IRS is tasked with distributing. Things could be changing, though. More people are getting vaccinated, meaning the end of the coronavirus... Read more →
Bernie Madoff leaving a court hearing in 2009. Bernard "Bernie" Lawrence Madoff died on April 14 in a federal prison medical facility where he was being treated for terminal kidney disease. The 82-year-old had been in jail since 2009 for orchestrating the world's largest Ponzi scheme. Madoff pleaded guilty on March 12, 2009, to 11 federal crimes, including operating the financial fraud that bilked as many as 37,000 people in 136 countries over two decades. He was sentenced three months later to the maximum 150 years behind bars and ordered to pay restitution of $170 billion. At the time of... Read more →
The tax world is full of instances that are different from the real world. There are quarterly estimated tax payments that don't align with our standard calendar quarters. There are birthdays that are considered having been celebrated earlier when we get older. And now there are financial transactions that aren't financial transactions, at least when it comes to cryptocurrency. IRS has crypto questions: Cryptocurrency, often referred to generally as bitcoin (the Kleenex tissue of virtual money), has been a target of the Internal Revenue Service for years. Most recently, the agency has focused on getting taxes due on crypto transactions.... Read more →
While GameStop's valuations captured a lot of attention because so-called ordinary investors were taking down the Wall Street pros, another investing sector also has been exploding. Cryptocurrency is riding a new wave of popularity, with a not-so-ordinary guy helping here, too. Elon Musk, who threw his social media support behind the video game retailer with his Gamestonk!! Tweet last month, now has helped push bitcoin's price sharply higher with pro-crypto tweets. That his electric car company Tesla adding $1.5 billion worth of bitcoin to its balance sheet also didn't hurt its value. Bitcoin's price rose last week to almost $60,000.... Read more →
Happy Monday to Patriots' — I mean Buccaneers' — fans. Your man Tom Brady did it again. Instead of the usual sports league drug tests, can we get a DNA sample to prove that the man is human? It's an even happier Monday for all y'all who collected on Super Bowl LV bets, both the ones on the on-field match-up and all the goofy prop bets for things only peripherally related to the National Football League championship game. The Internal Revenue Service is happy for you, too, as long as you report those winning wagers on your tax return. All... Read more →
Yes, I know very few filers use paper tax forms now. But even if you rely on tax software or a tax preparer, it's still worth a look at what's on Form 1040. There are some changes to the form and its three schedules for 2020 filings. (Photo by MoneyBlogNewz via Flickr CC) The 2020 Form 1040 makes it official. The never-really-a-postcard individual tax return is dead. This filing season, set to officially begin on Feb. 12, taxpayers and preparers will see a Form 1040 that looks very much like the two-page version that we tax veterans used to call... Read more →
A GameStop store in an Alaska mall, circa 2013. (Photo by Bentley Mall via Wikipedia Commons) GameStop is a struggling brick-and-mortar enterprise that sells video games, gaming merchandise and consumer electronics through its, for now, more than 5,000 retail stores across the United States. The Grapevine, Texas-based company has been the focus recently of stock market moves that have intertwined day traders, stock buying apps, novice and naïve investors, Wall Street hedge funds and lots of rich guys with social media accounts who can afford to fan the overheated investing flames. I'm a Boglehead buy-and-hold type of investor, so I'll... Read more →
We got our first tax statement yesterday. It's our mortgage lender's Form 1098 with details on potentially tax-deductible amounts like loan interest and property taxes. This is just one of the documents that millions of taxpayers are awaiting so they can file their returns. In addition to tax-related home transactions, the various documents that are or soon will be on their way include documents detailing income, be it from wages, contract work or retirement accounts; investments; winnings and/or gambling proceeds; and in some cases, health care information. A handful of these documents must be submitted with Form 1040. Most, however,... Read more →