Capital gain harvesting?
Lock in a 16% cgt rate on some gains or leave things invested to compound?
I’m on a low marginal tax rate this year earning around $25,000. The illness is permanent, I’m hoping to be earning 40-50k in future years, but these things are difficult to predict.
Ignoring cash flow issues entirely, I’m trying to figure out whether it’s best to sell down some shares to make use of the low marginal tax rate or if things are best left invested and compounding.
Math I have so far:
On a 40k capital gain
Minus 50% discount = 20k
Taxed at 16% + 2% Medicare = $3,600 tax
Then reinvest the remaining $36,400 in shares
A saving of about $2,800 over selling in a year with a higher marginal tax rate.
vs
Leave that $3,600, I would have paid in tax, invested in shares for 10 years and it ~doubles so it doesn’t matter that my marginal rate is now 30% + 2% Medicare.
Looking for insights or places my math has gone wrong. Thanks in advance.