Minimize taxes on investments by judicious matching of gains and losses. Where appropriate, try to avoid short-term gains, which are usually taxed at a much higher tax rate (up to 35%) than long-term gains, which in 2011 and 2012 are taxed at rates of zero and 15 percent depending on your tax bracket. Consider where feasible to reduce all capital gains and generate short-term capital losses up to $3,000 as well.
Tip: If you have a large capital gain this year, consider selling an investment on which you have an accumulated loss. Capital losses up to the amount of your capital gains plus $3,000 per year ($1,500 if married filing separately) can be claimed as a deduction against income.
Note: The maximum long term capital gains tax rate is currently 15 percent and will expire on December 31, 2012 when it’s set to rise to a maximum of 20 percent. Also of note is that starting in 2013, a 3.8 percent medicare tax may also be applied to long term capital gains. This information is something to think about as you plan your long term investments.