You can make some tax-wise choices in your financial affairs to improve the outlook for this year and future years.
Here are several ideas:
1. Take stock of capital gains & losses
Basic tax rule: Capital gains and losses from security sales and sales of other capital assets generally cancel each other out.
Any excess capital gain may be taxed at favorable rates.
For 2006, the maximum federal income tax rate on long-term gain remains 15 percent (5 percent for individuals in a lower regular tax bracket). Any excess loss offsets up to $3,000 of ordinary income in 2006 before it’s carried over to next year.
Strategy: Use gains and losses to offset each other. If you’re currently showing excess capital gains in 2006, realize capital losses at year-end to absorb those gains. Conversely, if the losers outweigh the winners, any gains you realize between now and Dec. 31 are tax-free up to the amount of the excess loss.
Of course, tax...(register to read more)