Income Tax Service For Individuals - Minimize taxes on investments by judicious matching of gains and losses. Where appropriate, try to avoid short-term capital gains, which are usually taxed at a much higher tax rate than long-term gains--up to 39.6% in 2013 for high income earners ($400,000 single filers, $450,000 married filing jointly).
If your tax bracket is either 10% or 15% (married couples making less than $72,500 or single filers making less than $36,250), then you might want to take advantage of the zero percent tax rate on qualified dividends and long-term capital gains. If you fall into the highest tax bracket (39.6%), the maximum tax rate on long-term capital gains is capped at 20% for tax year 2013 and beyond.
Net Investment Income Tax
Starting in 2013, a 3.8 percent tax is applied to investment income such as long-term capital gains for earners above certain threshold amounts ($200,000 for single filers and $250,000 for married taxpayers filing jointly). This information is something to think about as you plan your long term investments.
This year, and in the coming years, investment decisions are likely to be more about managing capital gains than about minimizing taxes per se. For example, taxpayers below threshold amounts in 2013 might want to take gains; whereas taxpayers above threshold amounts might want to take losses.
In addition, consider, where feasible, to reduce all capital gains and generate short-term capital losses up to $3,000 as well.
· Tip: As a general rule, if you have a large capital gain this year, consider selling an investment on which you have an accumulated loss. Capital losses up to the amount of your capital gains plus $3,000 per year ($1,500 if married filing separately) can be claimed as a deduction against income.
· Tip: After selling securities investment to generate a capital loss, you can repurchase it after 30 days. If you buy it back within 30 days, the loss will be disallowed. Or you can immediately repurchase a similar (but not the same) investment, e.g., another mutual fund with the same objectives as the one you sold.
· Tip: If you have losses, you might consider selling securities at a gain and then immediately repurchasing them, since the 30-day rule does not apply to gains. That way, your gain will be tax-free, your original investment is restored and you have a higher cost basis for your new investment (i.e., any future gain will be lower).
Please call us if you need assistance with any of your long term tax planning goals. For no obligation free consultation contact us today!
(763) 269-5396, (952) 583-9108, (651) 621-5777, (612) 224-2476, (818) 627-7315, (773) 599-7182
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