Now’s the Time to Trim Your Account and Reduce Your Taxes

With Thanksgiving out of the way and Christmas not far away, many are thinking of buying and trimming a tree for the holidays.  New Year’s is just around the corner, however, and once the new year starts, your income will be largely set for the year.  Now is the time to make some last-minute adjustments and do some trimming of your portfolio to save some money on your taxes.  Here’s how:

1) Sell some of your losers.  If you’ve taken some gains for the year, you’ll need to pay taxes on those gains unless you offset the gains with some losses before the end of the year.  If you have a stock or two that has done poorly, now is the time to accept the loss, sell the shares, and use the loss to offset your gains.  You can deduct your losses 1-for-1 against capital gains (depending on the time frame – check with an accountant for details).  You can also deduct $3000 against regular income.

Note that you need to be careful here.  It is usually best to sell positions that you know aren’t going to work out and use the money elsewhere.  If you have stocks that you still have faith in, meaning the company is still doing well and the stock has sold off for technical reasons, it is usually best to just hold onto the shares.  If you try to do something cute, like sell the shares and then buy them back immediately, or buy some additional shares and then sell the ones you held for the loss, you may end up doing a “wash sale.”  This happens when you buy additional shares within 30 days of taking a loss (either before or after you sell the shares), establishing essentially the same position.  If this happens, you will not be able to deduct the loss.

2) Contribute to your Kids Educational IRA Accounts.  You’ll need to make contributions to your kid’s college accounts before the end of the year.  Hopefully for each child you have an educational IRA and are contributing the max $2000 each year, because college costs are coming when they turn 18 whether you have the money or not.  You should also be saving outside of the educational IRA because costs will likely exceed what you build up in the educational IRA.

3.  Make your IRA contributions.  OK, technically you have until April 15th to make contributions to your IRA, but why not go ahead and make the contribution now while you are thinking about it.  Ideally you will make the contribution each January so that you can enjoy the tax deferred or tax-free investing all year long.

Contact me at, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Comments appreciated! What are your thoughts? Questions?

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.