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Year-End Tax Tips for Investors

investWriters from USA Today offered year-end tax tips and some of the most interesting information they provided was for investors.

Cutting your losses: Consider your investments—have you sold any stock at a loss? Were you aware that “…you can claim investment losses even if your losses exceed your gains or you don’t have any gains at all. In this case, your taxable income can be reduced by the amount of your losses.”

To take advantage of this, some people review their investments at the end of the year and decide to sell investments that are not performing well.

Mutual funds: Some investors buy into mutual funds right before the funds make their distributions at the end of the year, thinking that this will help them make an easy profit. What they may not realize is that the shares lose value after this distribution and that they will be taxed on these gains. People who buy mutual funds after the yearly distribution may not profit as much as they imagine because you did not own the stocks as they grew.

Instead, according to USA Today, “The smart move is to find out when, or if, the mutual fund will be making a significant distribution to shareholders — and to buy into the fund after that. These distributions often occur in December, and most major funds will publish the date of the distribution on their website. If you can’t find it, give the fund company a jingle and ask.”

If you have been investing on your own and need more guidance, work with a Fee-Only financial planner to come up with an investment strategy that will help you make the most of your resources. Starting the new year with financial planning and an investment strategy in place can help you end the following year in better financial shape.