It’s not too late for a few year-end Tax Saving tips!

As the weather turns colder and the end of 2013 approaches, there is still enough time to do some year-end tax planning so that you can hopefully keep as much of your money in your pocket, rather than sending it off to Washington next April. Here are 3 tax savings techniques that may help you accomplish just that.

1) Time for some “Tax Loss Harvesting”

Tax loss harvesting is purposely selling an investment at a loss that is not in a qualified tax deferred retirement account. The IRS taxes you on your total gains for the year so you can therefore use losses in one part of your portfolio to offset gains in another and reduce your tax bill.
The federal government currently taxes long-term capital gains (from the sale of investments held more than 1 year) at a rate up to 23.8%, and short-term capital gains at an individual’s ordinary income tax rate. This year, the highest income tax bracket is a whopping 43.4%*.
According to the IRS, you can also carry your losses forward indefinitely. So make sure you’ve used up all of your losses from prior years. Quick tip; take a look at holdings you may have purchased in 2008 to make sure you’re not leaving some losses on the table.

How can you still stay invested and avoid a “wash sale”?

If you own individual stocks that you can sell at a loss but still want to maintain exposure to that market sector, consider swapping for a sector ETF or mutual fund during the “wash sale” period.
The “wash sale” rule says that an investor can’t claim a loss on the sale of an investment and then buy a “substantially identical” security for the period beginning 30 days before and ending 30 days after the sale. Basically, the IRS wants to make sure that investors don’t get a tax break and then instantly buy back their original investment.

2) Gifting highly appreciated stock

If you own stocks that are not part of a qualified plan, and if you are charitably inclined, you may want to consider gifting highly appreciated stock to your favorite charity. Your charitable deduction would be the value of the stock when you make the gift, not the price you paid for the shares when you purchased them. If you are in the highest tax bracket, this gifting strategy is of greatest value to you.

3) Gift your Required Distribution RMD directly to a charity

If you’re charitably inclined and are over 70 ½, you can donate your required minimum distribution from your IRA custodian/trustee directly to a charity. Persons over 70 1⁄2 can transfer up to $100,000 before year-end but note that the “qualified charitable distribution” must be a transferred directly from an IRA to a qualified charity. The qualified charitable distribution will then be excluded from your taxable income.
There is an additional benefit of such a transfer since the amount of the donated RMD is not included in one’s adjusted gross income. This fact means that certain phase-outs of other deductions that are tied to AGI might be averted.
Additionally, this IRA transfer is most valuable for those philanthropic individuals whose charitable contributions are already up against the 50 percent of AGI limit. Again, since the transferred distribution is not included in AGI, a charitable donation can be made without being included in the 50 percent of AGI limitation.

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