How (and why) should you review your investments for Tax Deductions?!

Today my monthly reminder popped up to: Review my portfolio for tax deductible losses, IRA, SSA benefits, and more".  And I was just thinking how many people would know exactly what to look for.  My guess is: many.  But not all would be 100% certain they are looking at the right thing.  So to accomplish # 1 on the list of things to do in December I would:

Check my investment portfolio for loss-harvesting candidates:

Which means look for positions that have an "unrealized" loss.  You can deduct as much $$$ in capital losses as you have in capital gains and an additional $3,000 can be tax deductible.  So if you had a lot of positions that you sold at a gain you can and should look through your portfolio to sell off some less desirable stocks with an unrealized loss to realize the loss.  This loss will allow you to offset your capital gains and will save you the capital gains tax on your winners. 

As you "rebalance back" to your strategic, long-term asset allocation - means if you traded out of positions your portfolio may no longer reflect the asset mix of 20% in equities, 20% in bonds, and 60% in futures (just kidding) but you understand that after trading out of certain positions you may have a different investment mix than prior to your trades.   This provides an opportunity to sell out of loser positions and use the extra cash to fill in the gaps in the securities that align to your planned portfolio mix.

Always remember not to buy into the same positions within 30 day of the sale because that will render the trade useless for tax purposes.

This Forbes article How to Pay Taxes Like Mitt Romney is a good reference: http://www.forbes.com/sites/financialfinesse/2012/01/25/how-to-pay-taxes-like-mitt-romney/

Here is the remainder of the December to do items on my Financial Calendar:

2) If you want to establish an Individual 401(k) or other QRP (qualified retirement plan) this year for your small business, the account must be opened by December 31.

3) If applicable, don't forget to take the annual required minimum distribution from your IRA by December 31.  - If you are 70 and 1/2.

4) Request your annual Social Security benefit statement from ssa.gov. Compare your earnings record against your old tax return info for accuracy.  - Yep, Social Security Administration may make mistakes.  It also will help to have this document for your updated plan for next year.