6 Tax Moves to Consider Making in December

taxIt’s not what you make, but what you keep that counts.

1. “Realize” Capital Gains by Selling Winners

Many people sold investments a few years ago when the stock market plunged.  For some, those sales created a tax loss that could be used to offset future capital gains.  The gain or loss is computed simple by subtracting the dollar amount used to purchase the investment from the proceeds from the sale. With the nice rebound in the stock market, it may be wise to sell investments with gains and use the prior losses to offset the amount of the gains.

2. Do a Bond Swap

If you had the misfortune of buying into a long-term bond mutual fund this year and watching the share price drop this summer when interest rates spiked up a point.  Swapping bond funds is exactly as it sounds, selling one bond mutual fund and using the proceeds to buy a similar one (NOT THE SAME FUND).  This way you take use the capital loss to offset gains.  The same can be done with other investments, just make sure not to swap with identical investments such as index funds.

3.   Prepay Mortgage

It may be worthwhile to make your January mortgage payment to have the interest portion counted toward this year’s tax return. That would be dependent on what you expected your income to be this year compared to next.

4. Prepay Quarterly Estimated Tax

If you make a Quarterly estimated income Tax payment that is due by January 15th, you may want to pay that before year-end as well depending again on your expected income next year compared to this year.

5. Move To Tax-Efficient Vehicles

For example – Seek Municipal Bonds and Tax-Efficient Stock Portfolios for 9 Great Tax Saving Ideas click here.

6. Consider How/Where you Divide Your Stocks and Bonds

For example, consider keeping your taxable bonds mutual funds in your 401k or IRA’s and your stock mutual funds in your taxable accounts.  By doing this, your dividends will not fall on to your tax return (your 401k or IRA are tax-deferred) and gains from your stock or stock mutual funds would be taxed at the preferential capital gain rate.


All of these strategies should be considered on a case by case basis and I suggest you discuss with your advisor or accountant before implementing.

The time to wrap up 2013 is here and it’s not too early to start making plans for 2014.  Let me know if you have a need to discuss either one.

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