Obama’s health care reform complicates cap gains picture

The debate over whether to take capital gains this year heated up yesterday when the House passed health care reform legislation.

The tax rate on long-term capital gains were already set to go up at the end of the year to 20%, from 15%, for households earning over $250,000. But with the passage of health care reform looking likely, investors will probably see the cap gains rate jump to 23.8%.

“For large earners, this certainly is another reason for them to look at bringing gains in for this year,” said Andrew Altfest, executive vice president of strategy and investments at Altfest Personal Wealth Management, which manages about $500 million in assets.

But for most investors, it still probably makes little sense, said Mr. Altfest, who heads up the firm’s tax task force.

For it to make sense to take capital gains now, an investor would have to believe that a stock would fail to appreciate enough to outweigh the tax loss that would be realized, he said.

And even then, the move may not make sense.

The legislation doesn’t call for the increase to take effect until 2013, and a lot can happen between now and then, Mr. Altfest said.

“You’re taking chances by trading ahead of the rule change,” he said.