Tip 1: Don't overreact to talk about the "Fiscal Cliff."
It's almost impossible to turn on the TV, listen to the radio, or pick up a newspaper without hearing or reading something about the "Fiscal Cliff" and the impending economic disaster headed our way. Before you make any changes to your investments, you should think about getting a second opinion from a CPA or fee-only advisor. It's usually not a good idea to react to media hype!
Tip 2: Be careful when buying a new mutual fund.
Most mutual funds pay out capital gains and dividends toward the end of the year, so you want to check for potential distributions before you buy a new fund. The IRS doesn’t care how long you’ve held a fund so you’ll be taxed even if you buy it just before the distribution. And since the share prices of funds and stocks drop by the amount they distribute, missing the dividend won’t affect your future return.
Tip 3: Prepay your property taxes.
Property tax payments aren’t due until the end of January, but you can deduct them this year if you pay them by the end of 2012. But if you expect to be in a higher tax bracket next year – due to tax increases or higher earnings in 2013 – then you could wait until January to pay and then prepay next year’s taxes in order to double up on the deduction.
Tip 4: Pay your January mortgage payment before December 31st.
Paying your January mortgage payment before the end of the year will increase your 2012 mortgage interest deduction by the extra amount of interest you pay in the January payment.
Tip 5: Review your portfolio.
If you have investments in taxable accounts that are worth less than you paid for them, it might make sense to sell them by the end of the year to realize the loss. These losses can be written off against investment gains, and excess losses can be written off against income up to $3,000. Unused losses can be carried over to future years.
Tip 6: Defer income.
If you have your own business and use the cash method of accounting, you might be able to benefit from waiting until the end of the year to invoice customers so you don’t receive the income – and have to pay taxes on it – until 2013.
To learn more about our company - and find out how we are different from other financial advisors - visit www.VannoyAdvisoryGroup.com or call us at (210) 587-6433.
