Market Beat: Year-end tax planning

Ken Roberts
Market Beat

As the year end approaches it is a good time to review your portfolio for tax considerations. There have been some changes in the last year due to new legislation.

If you have realized long-term capital gains in your account, you might want to review other holdings to see if they can be offset by long-term capital losses. The same is true for any short-term capital gains. Long-term losses will offset long-term gains and vice versa. The same strategy can be used for short-term gains and losses.

Short-term gains are taxed as ordinary income and long-term gains are subject to a lower rate. One new change is that long-term capital gains and qualified dividend income maximum tax brackets no longer follow the regular income tax brackets.

If you have a security that is showing a loss and you would like to sell it before year end for tax purposes, you need to be aware of what’s known as the “wash sale rule.” If you sell a stock, you must wait at least 31 days after the sale before you can re-purchase it or a substantially identical security. If you do re-purchase the stock within the 31 days, the loss will be dis-allowed.

IRA contributions do not need to be made by the year end, they can be made up until April 15 of next year or until you file your tax return for 2018, whichever is earlier.

A new change this year, due to the Tax Cuts and Jobs Act regards IRA recharacterization. The special rule that allowed one type of IRA conversion contribution to be recharacterized into the other type has been repealed. For example, a conversion contribution establishing a Roth IRA during the year can no longer be recharacterized as a traditional IRA contribution. However, you still may contribute to a Roth and recharacterize it to a traditional IRA by the end of they year or up until the time you file your return. The new rule applies to IRA conversions.

IRA contribution limits are unchanged this year, for Roth and traditional IRA accounts the maximum contribution is still $5,500 unless you’re over the ripe old age of 50 years, then you can add another $1,000 for a grand total of $6,500.

Consult with a qualified tax advisor if you need assistance with your situation. Taxes can be quite complicated these days and the rules change frequently.

Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.

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