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I may be moving from Texas to Colorado. Colorado has a 4.65% tax on income, including capital gains, whereas there is none in Texas.

I'm wondering if it makes any sense to sell and rebuy stocks with large gains while I still live in Texas? From what I understand, I would only be subject to colorado tax for gains made once I move there.

I'm wondering if it's advisable to do this? Obvious I would avoid 4.65% taxes in gains on the stock. On the other hand, I would lose the value of deferring my tax payment to the future, and I would also lose any possible tax losses if there was decline the stocks from this point. On some of it I feel pretty good that it's unlikely to lose value. But with the state of the EU I suppose anything is possible in the world economy these days.

Any opinions? Would you ever consider this, or is the risk unlikely to be greater than the potential gain?
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Interesting question. On the one hand you get nailed for the federal tax sooner, shrinking the amount invested and (hopefully) growing. And on the other you avoid the state income tax.

...and I would also lose any possible tax losses if there was decline the stocks from this point.

That sounds backwards to me. Selling and re-purchasing would raise the cost basis higher, and the higher cost basis would increase the chance of a future loss.

Another factor to consider is how long you intend to hold those stocks. If you had to sell in less than a year you might be stuck with short-term capital gains, which depending on the size of the gain in that time could really hurt. Likewise, how long do you expect to live in CO?
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I'm wondering if it makes any sense to sell and rebuy stocks with large gains while I still live in Texas? From what I understand, I would only be subject to colorado tax for gains made once I move there.


as a general rule: Don't let the TAX horse's butt WAG the INVESTMENT monkey 



but this could be the exception:
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I generally agree
" as a general rule: Don't let the TAX horse's butt WAG the INVESTMENT monkey "

but depending on your tax bracket and the amount of gains involved, it might make sense.

Before you move and before 2013 rolls in, you sell, pay capital gains and set a new cost basis going forward.

You avoid the future state tax, and you may be better off with the Fed as capital gains tax may increase in 2013.

I am looking at the same thing in reverse. Planning to move away from NY /NJ to a more tax friendly state. That might happen in 2012 or in 2013.

Best of luck.
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A few considerations;

The reduction in shares after you buy the stock back would also reduce any dividends that are being paid. It might take a while but eventually that could eat up any savings.

If you will retire there, then check to see if Colorado exempts any of the capital gains from taxation as retirement income.

If you will be moving before the end of the year then you will likely have to file 2012 taxes in Colorado and they might still try to collect some of the capital gains.
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If you will be moving before the end of the year then you will likely have to file 2012 taxes in Colorado and they might still try to collect some of the capital gains.

They can try all they want, but they can't tax income that has no nexus to the state and was received before establishing residence in the state.

Ira
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