As the end of the year approaches, investors can cash in some tax-saving opportunities. Here are seven prime examples.
1. Harvest losses from securities sales
The basic tax rule is that capital gains and losses from sales of securities and other capital assets cancel each other out. Plus, if your losses exceed your gains, you can use the excess to offset up to $3,000 of ordinary income in 2010. Any remainder is carried over to 2011.
Strategy: Trigger losses before the end of the year to shelter previous capital gains. On the other hand, if you’re showing a net loss for the year, trigger some capital gains before year-end. The earlier losses can shelter later gains from taxes.
For 2010, the maximum federal tax rate on long-term capital gains is 15% for investors in the 25% bracket or higher (but see No. 3 below). To qualify for long-term capital gain treatment, you must hold the asset for more than one year.
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