14d • General discussion
Inflation Is Stealing Your Gains — See How Much “Phantom Tax” You’re Paying
I sent out an email about this already and hopefully you saw it. In case you didn't, here is a new tool I created to show how much tax you're paying on inflation when you sell stocks, real estate, or business assets.
Right now this is gaining traction in the media again because, even though this proposal to adjust a cost basis to account for inflation has been around for over ten years, it's gained renewed traction because the Republicans are concerned about their performance in the midterm elections coming up in a few months.
I personally got radicalized on this topic when I saw a client have to pay tens of thousands of dollars on a property sale. When I did this inflation adjustment calculation manually, it came out to be a break-even transaction.
The house was bought 20 years ago and it was a whole lot of money back then. Twenty years go by, the property is sold, and there’s a sizeable nominal capital gain. In real terms, after adjusting for inflation, it was basically break-even. All of this tax that was paid is basically an infinite tax rate because the gain was zero. You have to pay taxes on current dollars, even though the money that was spent 20 years ago on the purchase was eroded over time.
So I'm all in favor of this type of proposal being passed as it will at least somewhat more accurately reflect the reality of the investment impact.
Feel free to use the gains calculator tool to find out how much inflation tax you're paying on a sale you might have already had, or one you might be considering.
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Inflation Is Stealing Your Gains — See How Much “Phantom Tax” You’re Paying
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