Personal Finance

Before you ring in 2018, make these big-money tax moves

Key Points
  • Now is the time to employ strategies that could result in big savings on your tax bill.
  • Take a look at your investments for gains and losses and keep an eye on distributions from mutual funds.
  • Be sure you make charitable donations and consider donating appreciated property.
Year-end investment strategies

Before you ring in 2018, it's time to revisit some year-end tax strategies that could positively impact your tax bill.

The end of the year is a great time to make moves that will mitigate your capital gains for this tax year, said Tim Steffen, director of advanced planning at Milwaukee-based investment firm Baird.

Here are three strategies you may want to consider:

1) Take a look at your net gain-loss position

Look at your portfolio to see what gains you have realized during the year, Steffen suggests. You may want to offset those gains by realizing some capital losses in your portfolio.

When using this strategy, look to use the same kind of losses and gains, Steffen said. A short-term gain will be offset by a short-term loss and a long-term loss counteracts a long-term gain.

New Year's Eve in Times Square
Jeff Kravitz | FilmMagic | Getty Images

2) Be aware of mutual fund distributions

If you are invested in mutual funds, keep in mind that they tend to make larger distributions toward the end of the year, in late November or early December, Steffen said.

"That can skew your capital gains situation," he said.

When making new investments, be careful not to invest in mutual funds just prior to their distribution dates.

"You don't want to purchase just before those, and then end up getting distributions for the gains that were realized all during the year before you even own the fund," Steffen said.

3) Make strategic charitable donations

Be sure to make your charitable donations before the end of the year. Using appreciated property rather than cash can be a great tax saving strategy, according to Steffen. That is because you get a deduction for the full value of the property without incurring a taxable gain.

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