The end of the year will be here sooner than you think. Before you get caught up in the holiday bustle, take a little time to consider year-end investment moves that may help reduce your 2016 income taxes.
Get help from your losers
If you’ve realized a capital gain from selling an investment, review your portfolio for investments that haven’t been performing up to your expectations. Selling underperforming investments can generate capital losses that can be used to offset capital gains and up to $3,000 of ordinary income.
Here’s how it works. Let’s say you have a $5,000 capital gain from selling shares in a mutual fund* earlier this year. You’d like to offset your gain by selling shares in another fund that has consistently shown losses on paper. Your strategy might be to sell enough of your shares in the second fund to realize an $8,000 loss. The loss would offset your $5,000 capital gain, and you’d be able to use the additional $3,000 to offset the same amount of ordinary income.
Look at your winners
If you’ve already sold investments at a loss, it may be a good time to take capital gains on other investments you’ve hesitated to sell because of the tax consequences.
Taxes should never be your only reason for selling an investment. Reviewing your portfolio with your financial professional and talking with your tax advisor can help you determine what makes sense for your situation. Give us a call today to learn how we can help at 212-880-2617. You can also request a free consultation online.
* Because mutual fund values fluctuate, redeemed shares may be worth more or less than their original value. Past performance won’t guarantee future results. An investment in mutual funds may result in the loss of principal.
Mutual funds involve risk and are offered by prospectus (and summary prospectus, if available), which you can get from your registered representative. Carefully consider investment objectives, risks, charges and expenses of the investment company before investing.
The prospectus will include this and other information; read it carefully before investing. Investing involves risks, and there is no guarantee that any one strategy — including diversification — ensures a profit or protects against a loss in a declining market. You should consult with your financial professional regarding your particular situation.