Year End Tax and Financial Planning

The Congressional Super Committee’s inability to act marks the third year in a row that U.S. taxpayers face major uncertainties about the U.S. tax code. The best bet is to not dwell on that unfortunate circumstance and focus on what one can do in year-end planning. Here are some of the important issues with helpful resources available at the Ann Arbor District Library.

This is the time of the year to think about gains and losses and the fact that losses can be carried over to offset gains in future years. You can deduct up to $3,000 of long term losses against ordinary income and this can bring happiness to a dreary world! Maybe it is time to sell the one that stings every time you review your portfolio. Learn all about it with J.K. Lasser's 1001 Deductions and Tax Breaks 2012.

Rates on capital gains, interest and dividends are at historic lows and will be changing in 2013. We don’t know what the changes will be but we do know that a new 3.8% tax on net investment income for people with certain adjusted gross income levels is due to take effect in 2013. It might make sense to talk with your financial advisor about long term gains with these changes looming. The Ernst & Young Tax Guide 2011 and J.K. Lasser’s Your Income Tax 2012 are both excellent sources for more on this important issue.

One really important rule that has changed for this year is cost-basis reporting on equities in taxable accounts. As of 1/1/2011 brokerage firms are required to share purchase price information on stocks that were sold with the IRS. Your broker should have been in contact with you (if not, shame) about selecting a method for selling—there are at least four reporting methods. The one you choose determines how much money you keep when you sell stock. If you don’t select a method the IRS rules specify first-in, first out, which can make a big difference if you bought the same stock at various times for different prices. You are allowed to switch methods before selling, not after.

The Alternative Minimum Tax (AMT) “patch” enacted late last year expires at the end of this year. A good place to get up to date about it is J.K. Lasser's New Tax Law Simplified 2011.

Estate and gift taxes are expected to remain unchanged through 2012. Two great sources are Estate Planning Basics and Your Michigan Wills, Trusts, & Estates Explained Simply.

And lastly, the soundest advice Wall Street has to offer: “Buy low, sell high.”


Thanks for the great blog. It is hard to believe tax time is right around the corner again. Buy low, sell high..Boo yah!