Allowing taxes to dictate your investment strategy is rarely a good idea. But if you’re already considering selling appreciated securities or other assets -- even if you don’t have losses to offset them -- cutting them loose by year-end could save you money (you can harvest losses to offset investment gains, plus shield up to $3,000 of ordinary income from taxes).
Unless Congress extends the Bush tax cuts, the top rate on capital gains will rise to 20%, and the top rate for dividends will jump to 39.6%. Even if Congress extends current rates, the new 3.8% surtax on unearned income, levied on singles with adjusted gross income over $200,000 (over $250,000 for married couples), will boost the top rate for long-term capital gains and dividends to 18.8%.
If you think you’re going to need to sell some of your investments to raise cash next year, do it before December 31. And if you're an investor in the two lowest income tax brackets, 2012 is the last year you will pay zero tax on capital gains and dividends.
To take advantage of the 0% capital-gains rate for 2012, your taxable income can't exceed $35,350 if you are single; $47,350 if you are a single head of household with dependents; or $70,700 if you are married filing jointly.
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