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Tax planning for your investment portfolio


Watch planning for your investment portfolio video here.

Recent changes to ordinary income tax rates and tax brackets affect the tax you pay on investments.  Your long term capital gains rate can be as much as 20 percentage points lower than your ordinary income tax rate, which make long-term gains more attractive. 

If you’ve sold investments this year, and have substantial gains, then you may want to review your portfolio for unrealized losses and consider selling them before year end to offset your gains.  

Income investments 

Some types of investments produce income in the form of dividends or interest. Here are some tax consequences to consider: 

Qualified dividends are taxed at the favorable long-term capital gains tax rate rather than at your higher ordinary-income tax rate.

Interest income generally is taxed at ordinary-income rates. So stocks that pay qualified dividends may be more attractive taxwise than other income investments, such as CDs and taxable bonds. 

Capital Losses

If net losses exceed net gains, you can only deduct up to $3,000 of the losses per year.  You carry forward the excess losses until they are used.

Although tax considerations are important, don’t let them control your investment decisions. You need to consider your goals, risk tolerance, fees, and other factors related to buying and selling securities.

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