Four Last Minute Tax-Saving Strategies

December 22, 2011 | Subscribe to our RSS Feed

Here are some last minute tax saving strategies, although some may be dependent on the timing of certain political or economic events!

1. Capital Gains:

Long-term capital gains continue to be taxed at favorable rates through 2012, with middle- and higher-income investors taxed at a maximum rate of 15 percent. Low-income tax payers in the 10 and 15 percent brackets for ordinary income have a zero-percent rate, meaning they do not pay tax on any long-term gains or qualified dividends. Selling now (or in 2012) is sensible if the investor wants to cash in capital gains.

If you are looking for long-term rates, investors are required to hold an asset for longer than one calendar year.  It remains to be seen what Congress will do about the capital-gains increase in 2013, and absent of any action, tax rates will go up.  Investors may want to consider purchasing assets before the end of 2011 so they can sell before 2013, while they are still guaranteed favorable rates.

2. Stock Sales

Investors should remember that stock is treated as sold on the trade date.  So, if you sell stock on December 29, 2011 but the settlement date is not until January, the gains and losses from the sales would still be recognized on the 2011 tax return.

3. Retirement Account Contributions

One quick strategy to reduce tax liability is to make a contribution to a traditional retirement account (IRA, 401(k), 403(b), SIMPLE IRA or SEP plan) and take advantage of the deductions.  Traditional IRAs are particularly easy to set up.

4. Charitable Giving

If you plan on deducting a charitable contribution, remember that the IRS requires the taxpayer to maintain a bank record or receipt.

For any contribution of $250 or more, the taxpayer must obtain and keep records of written acknowledgment from the qualified organization. Documentation for property with higher values requires an appraisal.

Contact us if you need help with planning or have questions.  Now is the time!

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