With only a few weeks remaining in 2010, now is a great time to make any tax-planning adjustments.
Step 1 is determining your general current capital gains and gross income situation. Do you have carry-forward tax losses? What are your current 2010 realized net short-term and long-term capital gains? What are your unrealized capital gains? What is your 2010 “ordinary income” situation looking like?
Answering these questions gives you a starting point for year-end tax planning.
For example, if you have big long-term capital gains because you sold a bunch of company stock to make a down-payment on a vacation property, you make ask yourself, “is paying 15% tax on these gains a good deal, or do I want to try to offset them with a few capital losses?”
Or, you may ask the inverse question… “I have a bunch of unrealized long-term capital gains; Should I sell now and realize them for the ‘bargain price’ of 15% tax?”
Some of these financial questions are tough to answer. That is why I pay my CPA $80/hour to help me answer them. [This is a bargain price; my previous CPA was $150/hour. Finding a good one for $80/hour was a godsend!] If your struggling to answer them, I’d encourage you to set up an appointment with your CPA, or if you don’t have one a local CPA. Bring your best answers or guesses, and you might be surprised how much they can enlighten you in one short hour.
A little year-end tax planning could save you $500, $1000, possibly several thousand dollars. If you have to pay $80, $100, or even $250, for this I’d say its money well spent.