Two Tips For Investors With Taxable Accounts

January 9, 2014
by Michelle Perry Higgins

Start Shopping for Long-Term-Care Insurance at 45What’s your most important tax advice for mutual-fund investors?

I have two critical tips for investors with taxable accounts to keep in mind throughout the new year:

1. Review your capital gains and losses for potential tax-saving opportunities. Are there capital losses within your portfolio that can potentially offset capital gains? Perform the analysis and make the necessary trades, as you have to sell the stock in order to recognize the loss. In addition to neutralizing the capital gains/losses, the IRS will allow up to $3,000 of additional losses to offset your taxable income. Plus, you can carry-forward losses to future tax year(s).  Note: Before selling any investment, please read up on these rules along with the “wash sale” rules.

2. Be mindful of any mutual-fund purchases you would like to make later in the year.  By law, mutual funds must payout to their shareholders the realized net capital gains in the fund. Typically, these capital-gains distributions are paid in December. If you are interested in purchasing a mutual fund, do your homework on the payout date, otherwise you may end up paying unwanted taxes on those distributions.