Our Top Year-End Investment Tips


This is a busy time of year for everyone, and it’s easy to forget about important financial decisions that are best made now. At Horizon Bank, we encourage you to take a little time out to make some strategic choices before December 31st.

Why now?
Because, while tax advantages should not be the only thing driving your investment decisions, making key choices before the year ends could minimize your tax bill next April! Here are seven top tips for handling investment income and losses for 2015:

1.       Make sure your portfolio is balanced. You may choose to sell some assets and use the money to buy different investments — and your broker can help you determine whether this could offer tax benefits as well.

2.       See if you’re investments are meeting your financial goals. You could be more aggressive if you want bigger earnings in a shorter amount of time — or you may need to set a more conservative strategy if you’re close to retirement.

3.       If you’re thinking of selling, look at how long you’ve owned each investment. This matters because when you sell assets held for a year or less, you generate short-term capital gains — which are taxed as ordinary income. Long-term capital gains, on the other hand, are taxed at a lower rate. Be sure to talk to your broker for details on the various tax rates if you’re considering selling off some of your portfolio.

4.       Look at offsetting gains with losses. Any losses over and above the amount of your gains could be used to offset up to $3000 of ordinary income (or $1500 for a married person filing separately). Or you can carry your loss forward to reduce taxes in future years.

5.       Consider the timing. If you have losses you want to document for tax purposes, but you still believe in a specific investment, be sure to consider your timing. For instance:

  • If you sell and re-buy the same investment within 30 days, your tax loss will not be allowed. Your broker can discuss other options for capturing losses from an investment you ultimately believe in, and want to be involved in longer.
  • If you’re buying a mutual fund or exchange-traded fund in a taxable account, think about delaying your purchase until after the date when dividends or capital gains are distributed. Alternatively, if you’re selling, you may wish to do so prior to that date.

6.       Take a closer look at tax-deferred accounts. Believe it or not, it isn’t beneficial to use these with all investments. In some cases, you may not get any additional tax advantages — or you may end up having to pay even higher taxes when you withdraw funds years down the road.

7.       Be selective about selling. If you want to unload some of your shares, consider which ones will help minimize your taxes. Different actions can help you achieve different goals, from offsetting gains with losses, to simply keeping your gains to a minimum.

Don’t hesitate to ask for help!
Each financial decision is complex, and could have a variety of outcomes. A financial advisor at Horizon Bank can help answer your questions and provide guidance on investment decisions. To learn more about your Investment options, Find a financial advisor near you or call 888-873-2640.