Gain Harvesting Before 2013 Tax Changes May Be A Good Idea – Seeking Alpha
Starting next year you must add a 3.8% Medicare tax to your investment income (including interest, dividends, gains, rents, and royalties — a.k.a “unearned income” as the IRS calls it), if you have adjusted gross income for IRS purposes of over certain levels.
The basic tax rates on short and long-term gains are scheduled to rise by variable amounts in 2013 depending on income (5% is a good round number for that for many investors), and then the 3.8% Medicare tax is on top of that.
Is paying tax now and reinvesting better than paying taxes later and at perhaps an 8.8% higher rate (and then who knows about 2014)? Given the straights we are in nationally and at the state levels, 2014 rates could be worse.