As year-end approaches, make time to review and, if
necessary, rebalance your investment portfolio. The past two years have
not been good ones for many investors, but there are some smart
year-end moves you can make to reduce taxes connected with your
investments.
* First, remember that any sales you make within your retirement
accounts are free of tax. If you need to trade just to rebalance
your portfolio, consider doing it in your IRA or 401(k) plan.
* If you're selling investments to weed out poor performers,
remember that losses can cut your tax bill. You can use
capital losses to offset taxable gains plus up to $3,000 of
other income. If you still have losses left over, you can carry
them forward to use in future years.
* You can often manage the size of your gain or loss when you
decide to sell some, but not all, of a particular stock or mutual
fund. To do this, you must have kept good records of the date and
the price for each share purchase. By selling the highest
cost shares first, you'll minimize your taxable
gain or maximize your loss. You must specify the particularshares
you are selling at the time you sell.
* Be aware of the "wash sale" rules that prohibit taking
a loss on the sale of an investment if you purchase the same or a
substantially identical investment thirty days before or after the
sale.
* If you plan to buy or sell mutual fund shares close to year-end,
take the fund's year-end distribution into account as it may
affect share price and your taxes.
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