Ask Terry Questions Tax hit on Senior’s sale of tax-free asset

Tax hit on Senior’s sale of tax-free asset

By Terry Savage on August 27, 2018 | Wild Card

I am 88. Until a few years ago I paid no tax. Then, when I started to cash in those tax-deferred investments I was hit with $8,000-$10,000 Federal taxes. Maybe that’s less than I would have paid while working, but it is a huge amount of money to me today. Nobody seems to mention that eventuality when they advise people to invest in tax-deferred items. In addition, is there any way to save money when cashing in mutual funds?

Terry Says

Whew, I don’t know whether you cashed in U.S. Savings bonds, or had a gain on some tax-free municipal bonds, but –with the exception of a Roth IRA — the government gets its money in the end! It must have been quite a big gain if the government took that much, even at the lowest tax bracket.
Have you consulted a tax advisor to see if can spread out the gains over the coming years to lower the tax bite? And did you know that if you DONT sell them while you are alive, your heirs will hot have to pay any taxes? That’s because under the current estate tax law, your heirs will get the cost basis as of the date of your death.

This is an important message to seniors. Unless (with the exception of savings bonds which you must cash in at maturity) you really don’t need the money, don’t sell the appreciated asset. Leave it to your hears.



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