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Year-end tax tips for investors


Just weeks remain before the door closes on many of the opportunities to save tax on your investment accounts for the 2012 tax year. Ensure you're taking advantage of those that apply to your situation.

Planning to buy investments? 
Taxes aside for the moment, you need to evaluate investment opportunities on their own merit. However, if you think a few weeks' delay won't matter much, it could be profitable to wait until January to make your purchases. For example, postponing the purchase of mutual funds in December means you won't have to report year-end distributions on your 2012 tax return. And, if you're planning to buy a fixed-term investment with annual interest payments, waiting until January lets you defer the interest and related tax until the 2014 tax year.

Planning to sell securities? 
The sale of stocks, bonds or mutual funds may trigger a taxable capital gain. Fortunately, only half of a capital gain is subject to tax at your marginal tax rate. But, even better, taxable capital gains can be reduced by allowable capital losses.

You can apply capital losses to capital gains realized this year. Any excess losses can be used to recover tax you paid on gains reported in the three previous tax years (2011, 2010 and 2009). Beware of the superficial loss rules if you sell and repurchase the same security within 30 days.

Another strategy is to realize enough capital gains this year to offset capital losses from 2012 or losses carried forward from past years. Unused capital losses can be carried forward indefinitely.

If you have no capital losses to work with, you may wish to postpone a planned sale of securities with unrealized capital gains until 2013. You'll defer tax on the capital gain for another 12 months and have extra capital to invest another year.

The best advice on buying or selling securities in the coming weeks depends on a number of factors, including your tax bracket this year and expected tax bracket in 2013 and future years. Talk to our team first. Every tax dollar saved or deferred represents an opportunity to grow your portfolio and build extra wealth for the future.

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