Practice tax efficient investing.
Sell off securities — If you have a large net capital gain so far this year, you might want to sell some stock to generate a loss before year end. Doing so could reduce the amount of tax you pay this year. However, if you sell stock to generate a loss, you’re prohibited from purchasing substantially similar stock. This is 30 days before or after the sale that generated the loss.
Be careful of buying mutual funds in December- If you’re planning to invest a in a mutual fund, find out when the fund declares its dividend. Confirm that the fund isn’t declaring a large amount of dividends in December. If you buy shares before the dividend is declared, you’ll increase your income by the amount of the dividend. This is true even if you reinvest the dividend in new shares. You can get this information at the fund company’s website.
Short-term capital gains are taxed at ordinary rates, so be aware of your holding period when selling stocks and other securities.
Remember to check your tax basis before selling stocks. If you acquired different blocks of the same stock at different prices, sell the blocks of higher-basis shares when divesting only a portion of your holding. This reduces your current gain recognition.
Medical Expense Planning:
Make flexible spending work for you — Make sure you have enough medical expenses in 2017 to meet the amount you set aside in your flexible spending account. If you don’t, you’ll lose the money. If you have extra money in the flexible spending account to spend, you might want to:
- Schedule end-of-year appointments
- Buy new prescription glasses and contact lenses
- Buy hearing aids
- Buy medicines you’ll need in 2018
Submit your receipts for eligible expenses within the time required by the plan. Some plans allow you an extra 2 1/2 months after the end of the year to use the unspent amount. Check with your plan administrator