Bank finance articles and tips

End year is an ideal time for investors to review their investment funds and investment activities throughout the year and make adjustments that will save them on their taxes. There are various moves that one can take to save on the tax that they would otherwise, pay during tax time. Some of these moves that one may consider are:

Adjust Your Stock Portfolio

Depending on the performance of your stocks and the transactions that you made during the year, this end year season is an ideal time to review the transactions and make adjustments that will save you on taxes. If you made some sales of stocks within the year that had some capital gains, it may be prudent to sell off some of the shares that have shed value and those shares that have a low value and you would like to remove from your portfolio. By doing so, you can claim a capital gain loss that can be used to offset the capital gains made from your earlier transactions and thereby paying no taxes. Furthermore, even if you would want to still hold some of the shares that have lost value, you can still sell the stocks and then buy them back latter as long as the re-purchase is done after a month.

Optimize on 0% Investment Rate on Low Tax Brackets

If you are on a higher income bracket, you can use your children and relatives who are in a lower income bracket to transact on your shares. For people in the lower income brackets of 10% to 15%, they get a 0% tax rate on qualifying dividends and on capital gains as long as the assets being sold were held for more than a year and one day. You can optimize on the 2010-2012 lifetime tax free gift allowance of $5 million to transfer the shares to trusted relatives. However, when transferring the stocks to children, you must do so within the limits of the Kiddie Tax rules.

Pay Tax Now on your IRA

If your traditional IRA has lost a lot in value with the depreciation of most investment funds, then you may consider paying tax on the fund so as to convert the fund into a Roth IRA fund. This way, you will not be taxed on withdrawal of the funds on retirement. By paying the tax now, you pay much less tax as the fund is low and when the fund increases again, the appreciation will be tax free. On the other hand, if you had already converted your traditional IRA account into a Roth IRA earlier in the year and the fund has depreciated further, it may be advisable to re-characterize the fund (by converting it back into a traditional IRA). This way, you will not pay tax for the funds that have been lost with the depreciation. The tax code allows a taxpayer to re-characterize within certain time-lines with no tax implications.

Donate Appreciated Investments

Another tax savings move that you may consider is the donation of appreciated investments. If you have some asset that has significantly appreciated over time, you may consider donating it as opposed to selling it. This is because if you choose to sell the asset, you will pay capital gain tax on the appreciated value, which is high. On the other hand, the tax code allows the taxpayer to deduct the full market value of the asset if he or she chooses to donate it. Therefore, over and above the noble act of donating, you get to save on your taxes.

Rob L Daniel and partners of Limon Whitaker & Morgan, for years have helped businesses and individuals Nationwide, with their delinquent IRS & State tax problems. The firm is based in Los Angeles, California USA. http://www.limonwhitaker.com / Tel:888.321.6188

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By Rob L Daniel
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