Yahoo Finance 3 Investment Maneuvers That Will Help You at Tax Time
Tax season is finally coming to an end. This is a time of relief for last-minute filers as well as a time when most people remember just how much taxes they actually pay annually. Now that the tedious task of submitting your tax return is out of the way, it's time to look for other opportunities to save on this expense. After all, you need to save more to retire earlier, right? Here are a few suggestions to get you started.
Look for tax-loss harvesting ideas. December is always the month when everybody suggests the masses look for capital losses to replace capital gains, but this tax-saving move is much more effective when done throughout the year. There's no rule that says you have to wait until the last minute, so continuously look to see if you can swap out some losers to reap the capital losses. Just remember to look for an alternative investment for the money to be parked in that's not substantially identical in order to satisfy the IRS. Plus, you don't want to change your investment portfolio mix anyway. If you do it right, you'll end up with more losses harvested for the year by looking for opportunities year-round. Another benefit is that you won't need to scramble when the holiday season comes around.
Think about the tax consequences of all your investment returns, and make changes for the long term. Lots of people I know want to move to passive index investing, but they hesitate to sell the winners in their portfolio because of the immediate capital gains hit. This is understandable, but consider selling anyway if you are in this position. You may still end up paying less to the tax man in the long term by dumping the winning fund now because some funds have so much turnover that the annual capital gains will still outweigh any benefit of holding them. As with anything, run the numbers and make the decision that will benefit your pocketbook with the long term in mind.
Consider changing your custodian if it means a cash bonus. This isn't a tax-saving move per se, because the money you get is considered income. But it's simple to move your investments between different brokerage firms these days with electronic asset transfers, so you should still consider making the switch. And since you aren't selling anything, you won't have to incur capital gains taxes by changing companies. You do have to make sure that the new firm is able to hold the assets you own already, though. Last year, I moved a few of my accounts to different custodians to take advantage of their sign-up bonuses. In all, I made thousands of dollars just by filing some online forms. Pretty easy money!
Don't stop with this short list, as there are many more ways to save and earn more. I talk to people who are well on their way to retire early all the time. One thing I noticed is that many of them are constantly looking for ways to get ahead. This hunger for a better future is really the secret to why many of them have amassed a fortune. The road ahead won't be smooth, but life will be easy one day. You just have to work at it.
David Ning is the founder of MoneyNing.com . <
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