A State Tax Break
High-income Californians have a strong incentive to postpone taking long-term capital gains--and other income--until 1996, if possible: The top California personal tax rate will drop effective Jan. 1.
For married couples filing jointly, taxable income above $219,441 this year will be taxed at a 10% rate by the state; above $438,885 the marginal rate is 11%. (For single filers the income thresholds are half those levels.)
But in 1996 the 10% and 11% tax rates will disappear and the top rate will be 9.3%, under a deal previously worked out between the Legislature and Gov. Pete Wilson.
Because California taxes capital gains in full, high-income earners thus are better off delaying gains till ’96--other considerations being equal, says Allan Jacobi, tax senior manager at Price Waterhouse/Los Angeles.