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An Investment Advisor Can Help You Make Year-End Decisions You Didn’t Know Existed
The most popular reason for making year-end decisions is so that you have the potential to save money on taxes if you make informed choices, which means you should consult with an investment advisor before the end of the year.
When you talk to your investment advisor you’ll find out that the strategy most people employ is all about timing: getting your timing right on tax planning can give you the option to control how you report your income and claim your credits and deductions. Most advisors will try to work a strategy in which you’ll be taxed less. One note to consider is that if investment planning decisions are made so that the bulk of your money is going into capital assets, you may have a stronger advantage in timing related to gaining from more lucrative tax rates.
An investment advisor can help you figure out how to use capital gains tax to give you a break on your taxes. For instance, your capital gains and losses get a special tax treatment. If the ordinary income tax rate maxes out at 39.6 percent and capital gains taxes are a maximum of 20 percent, it would make sense to convert your income into long-term capital gain income, which could lower your taxes by 19.6 percent.
Timing is important, but so is recognition of your capital gains. For those in the higher marginal tax bracket this year that foresee a lower one next year, it may be wise to wait on selling assets until you are in that lower bracket. So if you had plans to sell at capital gains before the end of the year, you may want to consider waiting until January.
How did your investments do in 2014? Take a look and try to determine what your capital gains are going to be. Now, look at your capital losses. You can offset your gains with those losses. There is also something called capital loss carry-forwards (up to an annual limit), which you can also use to your advantage. If you have gains that exceed your losses, you can put yourself in a better position by selling property that have built-in losses to offset those gains.
There are any number of situations where an investment advisor can research and identify gains and losses to give you more confidence as the year comes to a close. Don’t wait too long. Contact Family Investment Center now and let our team help review your investment portfolio for areas that may need immediate attention.