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Tax Planning: Year-End Investment Portfolio Reviews

Posted by McDonald & Osborne Posted on Oct 14 2015

Believe it or not, 2014 is rapidly approaching it’s end. Recent, wild swings in the stock market mean your investment portfolio deserves a good look. Encouraging your investment advisor to work in sync with your CPA to maximize tax savings could pay dividends for the upcoming tax return filing season. Back in Sept of 2013 we wrote an article entitled, How to Limit or Eliminate Capital Gains in Retirement . Now is as good a time as ever to revisit the topic.

Before we start talking tax savings, keep in mind that a positive tax impact alone does not always mean an investment move is prudent. Always work with a qualified advisor to ensure your investment moves make good economic sense. However, remember that taxpayers who fall in the 10% or 15% tax brackets are subject to a 0% tax rate on long-term capital gains until such gains push you into the 25% bracket (which starts at $36,900 of taxable income for singles and $73,800 for married taxpayers filing a joint return in 2014).

As we mentioned in last year’s article, be very careful in your planning because although you may qualify for tax-free capital gains, stock sale income increases your adjusted gross income (AGI) which in turn could cause larger portions of Social Security benefits to be taxed.

If you are sitting on a large number of capital gains for the year, you may consider selling some of the big losers in your portfolio. Those losses can be used to offset any gains plus up to $3,000 of other types of income for the tax year. Also, your year-end strategy should attempt to limit the 3.8% Medicare surtax on net investment income. This additional rate will apply to investment income of single taxpayers with modified AGIs over $200,000 and married taxpayers with modified AGIs over $250,000. See our article Understanding and Planning for the New Health Care Surtax for more on the Net Investment Tax.

Now that we have gotten through all of our 2013 tax filing deadlines, we are diving head-first into tax planning season for our clients. If you have questions about any financial moves you are considering making, call our office to ensure you understand the tax ramifications of such moves.

Stephen Osborne, CPA
Certified Public Accountant
sosborne@mo-cpa.com

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