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Edward Jones - Robert Nevarez |
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| Articles
About Financial |
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| Year-End Tax Moves Can Pay Off |
| By
Edward Jones |
| For many of us, tax season lasts until late in the day on April 15 when we drop our return in the mailbox or hit the ``send''
button to file our taxes electronically. But by then, it will be too late to take some steps that could have helped you out.
Fortunately, you still have until Dec. 31 to make some year-end tax moves. Here are a few to consider:
Sell your "losers'' -- In contrast to the last few years, 2003 was a pretty good one for the stock market, which means
you might have racked up some sizeable capital gains -- and some sizable capital gains taxes (although the top
long-term capital gains rate was cut to 15 percent this year for assets sold after May 5, 2003). To offset these capital
gains, you might want to consider selling some stocks that have declined in value. If your losses exceed your gains,
you can deduct up to $3,000 from your ordinary income; any amounts in excess of that figure can be carried over to
future tax years.
Of course, to take these losses, you'd really have to sell the stocks -- and you may be reluctant to do that. You might still
think these stocks have good long-term potential and fit in well with your diversified portfolio. So, can't you sell the stocks
and quickly buy them back after you've taken the losses? It's not that simple. IRS "wash sale'' rules bar you from claiming a
loss if you purchase a ``substantially identical'' security within 30 days of the sale.
To avoid wash sale consequences, you could wait at least 31 days after the sale before repurchasing the stock. Or you can
double your holdings in the stock and then sell your original shares after 31 days. You could also sell your shares for a loss
and purchase a stock that's similar to the one you sold. After 31 days, you could sell the new stock and repurchase the
original stock.
Delay income -- If you're scheduled to get a year-end bonus, ask your employer to defer it until January if this places
you in a higher tax bracket. Or, if you're self-employed or run your own business, postpone sending out some bills
until later in December.
Prepay state or local taxes -- You can generally take a federal tax deduction for your state or local tax payments. So,
if you are going to itemize deductions, and you don't think you will be in a higher tax bracket next year, you might
want to prepay your state or local taxes in 2003. But before you do, make sure you won't be required to pay the
alternative minimum tax (AMT). If you fall into the AMT category, you won't gain any additional deductions by
prepaying your state or local taxes.
Contribute to charity -- Your charitable deductions may be tax-deductible. And, if you decide to give appreciated
stocks held longer than one year instead of cash, you'll be able to claim the full market value of the stock, while
avoiding future capital gains taxes.
Bunch your deductions - If you have deductible expenses coming up -- business expenses, medical expenses,
miscellaneous itemized deductions -- try to pay for them in December.
Boost your retirement plan contributions -- If you haven't "maxed out'' on your 401(k) plan, you may still be able to
contribute to it before Dec. 31. And you've got until April 15, 2004, to add money to your Traditional or Roth IRA.
Before making any tax decisions, you should consult with your tax specialist or attorney for professional advice on your
specific situation. But by following any or all of these suggestions, you may be able to improve the ``bottom line'' on your tax
return. And that can make for a happier tax season. |
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