The Wall Street Journal
Weekend Investor – Tax Report – November 24, 2012
Tax Moves to Make Now
As the ‘Fiscal Cliff’ Looms, Year-End Tax Planning is More Important Than Ever. What You Need to Do
By By Laura Saunders
Make charitable gifts.
If you want to donate IRA assets to charity, wait a bit longer.
Make an extra mortgage payment, or pay down principal.
Don’t fret about the alternative minimum tax “patch” for 2012.
Maximize contributions to employer-sponsored retirement plans.
Evaluate stock options and restricted stock.
Think twice before harvesting gains.
Harvest capital losses, up to a point.
Use up funds in a medical flexible-spending account.
Accelerate medical expenses.
Set up a health savings account for 2012.
Write next semester’s tuition checks before year end.
Prepay state taxes.
Make gifts up to $13,000 to relatives or friends.
Contribute to 529 education savings accounts.
Have a closely held business pay a dividend.
Buy depreciable equipment for a closely held business.
The annual scramble to make smart tax moves before Dec. 31 is proving especially vexing this year.
Congress still hasn’t settled 2013 tax rates on income, investments, large gifts and estates. Deductions and other breaks are also in doubt, now that politicians from both parties are calling for cutbacks—although in different ways.
Comments November 24, 2012
Exercise care when realizing capital gains and/or losses. Don’t let the tax tail wag the investment dog – even in the face of proposed increases in capital gains tax rates. Selling temporarily depressed investments to lock in a gain or loss may force you to wait on the sidelines as you wait out the “wash sale” period. But, the financial markets are ignorant to your waiting dilemma. As you lock in 5%-15% lower tax rates based on proposed tax changes, your investments may increase over 5%-15% – more than wiping out the savings.
For example, the S&P 500 index has increased 5.0% (from intra-day low to intra-day high) in the last five trading days, while the MSCI EAFE index has increased 5.2% in the same period. While these are broad based indices, many individual securities have fluctuated more wildly in same period. For example, Apple Inc., the highest weighting in the S&P 500 index, increased 13.1% in the same period.
Aaron Skloff, AIF, CFA, MBA
CEO – Skloff Financial Group
Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA), Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.