TEMPLE, Texas — A proposal has been put forward, although not in detail, about taxing unrealized gains to raise more money for the federal government.
So, you may owe money if your stocks and assets rise, even if you don't sell them.
The same thing would apply to your house. Unfortunately, the ambiguity around the proposal raises many questions and provides very few answers.
Would this only be for the very rich? Who does it really affect?
We spoke to an expert in all new Money Talks to get some answers!
Financial Advisor Rolandus Johnson told 6 News, "I will tell you this, there's a lot of things that are left in the grey area that are question marked. Or are unknown right?
One of those being, who would unrealized gains affect?
‘Rojo’ says, "Ok so if we're taxing unrealized gains, are we doing away with the tax differed system or the program like your retirement accounts they are all tax differed. So, is it just going to be non-qualified assets so your stand-alone annuities and brokerage accounts "
If an expert like 'Rojo' has this many questions, you can see that the confusion would be immense. But he was just getting started, what about your 401k?
Rolandus says, "Your 401k that's a tax differed idea, are we going to go into that? What happens on the back end if you tax the unrealized gains now. Or will you make that 401k tax free later on down the road? There's a lot of things that are left out. And so for us as advisors the one thing that we know for sure if it comes to fruition the way that we plan, is going to change dramatically."
Rolandus even has an idea on what one of those major changes will be to portfolios!
"Now we're going from having the least amount of cash possible in your portfolio, to now cash is going to become a huge part of your portfolio, because we're going to need money to."
So, when does 'Rojo' think that this would happen, or is it even possible?
Rolandus Johnson told 6 News, "If it does come to fruition which I think it won't go into effect until maybe a year or two down the road because that's a lot!"
And again, tax law would have to get passed in congress which is unlikely, Rolandus went on to say how important the Roth IRA is, and this new tax idea would make it even more valuable as it doesn't get taxed at distribution.
Of course, that law could change as well.
The Harris proposal on unrealized capital gains starts at those with wealth of over $100 million, but remember the federal income tax when adopted was only at 1% on the very wealthy. So, we shall see.