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| This quarterly newsletter
provides general business, financial, and tax
information to our clients. This information
should not be acted upon without further details
and/or professional assistance.
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Planning can trim taxes on your investments
Maximize your tax savings this year by reviewing your investment
tax planning before year-end. Here are a few strategies that
might reduce your 2007 taxes and prepare you for what's
coming in 2008.
 Maximize
your dividends and capital gains. Take advantage of
the preferred tax treatment on both dividends and long-term (more
than 12 months) capital gains. Review your current stock and
other investment holdings in order to generate dividends and
create long-term gains.
Make
the most of year-end stock sales. If you have a
few loser stocks in your portfolio, consider selling them
now. You can sell enough losers to eliminate all your realized
capital gains for the year, plus another $3,000 in regular
income. Be careful to avoid a wash sale (buying the same
security within 30 days before or after you sell shares at
a loss) since the tax rules disallow the loss. If you
have realized losses over $3,000, consider selling enough
of your winners to get back to the $3,000 amount. Taking
those gains will add nothing to your tax bill.
Time
your mutual fund transactions. A key fact to be
aware of is that mutual funds are usually required to distribute
their income annually to shareholders. If you purchase a
mutual fund just before a distribution date, you will receive
the distribution and be required to include it in your taxable
income. Since the price of the fund shares before and after
a dividend distribution reflect the amount of the dividend,
you are actually paying income tax on part of your own purchase
price. To avoid this outcome, call the fund and ask for the
ex-dividend date and the estimated payout and make your purchase
after that date.
Cut
capital gains taxes to zero. Beginning in 2008, the
tax rate on long-term gains will drop to zero for taxpayers in
the lowest two regular tax brackets.
Changes Ahead
 Beginning
in January 2008, the tax rate on certain dividend income and long-term capital
gains goes from 5% to 0% for taxpayers in the bottom two regular tax brackets
(10% and 15%).
In
2008, the "kiddie tax" expands to cover children up to age 19.
For full-time students, the age limit will be even higher — up to age
24.
If you're a single filer with income less than about $32,000 or married
with income less than about $64,000, the new zero long-term capital gain rate
could apply to you. In that case, you may want to postpone planned sales until
2008.
Beware
the kiddie tax. Also beginning in 2008, the kiddie tax rules apply
to children up to 19 years of age (to 24 for full-time students). Children
subject to the kiddie tax rules will not fully benefit from the new zero
capital gains rules. Now is the time to review your child's stock portfolio
and time planned sales to avoid any adverse effect the new rules could have
on your situation.
Act now to minimize your 2007 tax bill and position yourself to reduce your
2008 taxes. Give us a call for help in your planning.
©copyright
2007
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