Jamie Golombek: Here are a few things to think about while you eat your Halloween candy this weekend
For starters, when’s the last time you took a close look at your portfolio to make sure you’re comfortable with its current asset allocation? If you haven’t looked in months, you may be pleasantly surprised to find that your equity allocation is significantly higher than you had originally targeted.
But that’s where some investors get stuck. They are reluctant to sell an investment that has performed well because they don’t want to pay the tax, a phenomenon known as the capital gains lock-in effect. But if you consider that, eventually, you will have to pay the tax, it often comes down to a timing difference — pay the tax now or later.
If you anticipate that your tax rate will be substantially different in 2022, perhaps because you may have just started or returned to work in 2021, and thus had a lower income this year, you may wish to rebalance your portfolio in 2021 rather than waiting until 2022. Conversely, if you believe your tax rate will be lower next year, you should consider realizing those gains after Dec. 31.
Indeed, the last time the capital gains inclusion rate was changed, it was done as part of finance minister Paul Martin’s economic statement presented in the House on Oct. 18, 2000, when the capital gains inclusion rate was lowered to 50 per cent , where it has remained to this day. The change was effective immediately, as of that date.Article content
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