FI/RE tax-strategy hypothetical: If a new law raised the long-term capital gains tax rates, is it likely that the new rates would apply to gains that were amassed before the announcement/passage of the new law?

This isn't a strictly financial planning question, but many FI/RE-types are factoring the current long-term capital gains rates into their plans.

Let's say that you've been socking away money in mutual funds for a decade or two. You're now sitting on ~6-figures worth of long-term capital gains in a regular (not tax-advantaged) account. You're planning to retire soon and start drawing down your savings, with the intention of keeping your retirement income low enough so as to pay 0% capital gains tax.

And then...

Congress ups the rates (perhaps they decide to reclassify cap gains as ordinary income).

In this scenario, is it likely that the new rates would apply to the capital gains that you've already accumulated? Or is it more likely that the new rates would only apply to gains on securities that are purchased after the announcement/passage of the new law? Does anyone know what the precedent is for this type of change?

Depending on how much of your money is in tax-advantaged accounts vs not, this could have a decent impact on FI/RE plans. Does anyone else expend any mental energy trying to consider possibilities like this?

Submitted April 25, 2018 at 09:23PM by ArcLeft https://ift.tt/2I3sx3u