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Strategies to Consider to Reduce your Tax Bite

Margaret Meyer
Margaret M. Whelehan, CFP®, CDFA®
Vice President, Financial Advisor
[email protected]
(585) 394-4260 x42129

Although tax season is still a short time away, tax planning is a step you should take in advance of year-end. Waiting too long can rob you of the opportunity to implement strategies that can help reduce your income-tax obligation. A review of some commonly used strategies can help you identify some that might apply to your situation.

Winners . . .

Year-end can be a good time to review your investments with an eye toward getting the most mileage from profits and losses. One approach to consider is to sell and take your profits on securities you’ve held longer than one year to benefit from favorable tax rates on long-term capital gains. Long-term gain is currently taxed at a maximum rate of 15% for most taxpayers and 20% for taxpayers in the top regular tax bracket (39.6%).

. . . and Losers

Conversely, if you own investments that have lost value and consistently underperformed a benchmark since you acquired them, you might want to consider selling, especially if their future prospects look bleak. Capital losses are fully deductible to offset capital gains and up to $3,000 of ordinary income each year ($1,500 if married fi ling separately). Excess losses that you can’t deduct for 2013 can be carried over for deduction in future years, subject to the same limitations. Taxes should never be your only reason for selling an investment. Be sure to consider how the sale of a particular investment would affect your overall portfolio before you make a decision.


Donating to your favorite charities by December 31, 2013, can increase your itemized deduction for charitable contributions. If you donate using a credit card, you’ll be able to claim the deduction on your 2013 income-tax return, even though you won’t pay the bill until January 2014. 

Medical Expenses

In 2013, unreimbursed medical expenses are deductible only to the extent they exceed a 10% of adjusted gross income (AGI) floor amount. (The AGI floor amount is 7.5% of AGI if you or your spouse is age 65 or older). You might be able to exceed the floor in 2013 by bunching two years of expenses into one year. If possible, schedule elective surgery, dental work, eye exams, and early 2014 medical exams in late 2013 and pay the out-of-pocket costs before the end of the year.

Miscellaneous Expenses

You may claim certain expenses as miscellaneous itemized deductions once they exceed 2% of AGI. These include unreimbursed employee expenses, tax preparation fees, and certain other expenses. You may be able to exceed the floor by paying some 2014 expenses, such as dues for membership in professional societies, subscriptions to professional journals, purchase of tools and supplies needed for your job, and so on, in 2013.

Income Deferral

If you expect to have less income next year — perhaps your spouse is leaving the work force or planning to work part-time — deferring 2013 taxable income to the beginning of 2014 could have tax advantages. You might wait until January, for example, to make a planned withdrawal from your traditional individual retirement account. (Just be sure to take any required minimum distribution by year-end.)

For more information please contact one of our Personal Bankers today at 585-394-4260.


Investments are not bank deposits, are not obligations of, or guaranteed by Canandaigua National Bank & Trust, and are not FDIC insured. Investments are subject to investment risks, including possible loss of principal amount invested. Investments and services may be offered through affiliate companies. Past performance discussed does not predict future results.