SOURCE: Personal Capital

Personal Capital

April 12, 2012 09:00 ET

How to Cut Your 2012 Taxes

Four Tips to Reduce Taxes on Your Investments

SAN FRANCISCO, CA--(Marketwire - Apr 12, 2012) - If your 2011 tax bill came as a shock, don't let it happen again this year. Here are four tax-reduction tactics for your investment portfolio:

1. Harvest Losses - Sell losers to capture tax deductions.
2. Defer Gains - Hold big gainers to avoid capital gains tax.
3. Asset Location
- Optimize your assets across taxable and tax-deferred accounts.
4. Avoid Mutual Funds - High-turnover mutual funds distribute capital gains.

"Most investment managers focus on pre-tax return," said Bill Harris, CEO of Personal Capital. "But it's not what you earn, it's what you keep -- your after-tax return -- that counts. At Personal Capital Advisors, we help you manage both."

1. Harvest Losses. Many portfolios hold both big winners and losers. When you sell your losers, you create tax losses that can offset investment gains, or even offset up to $3,000 of ordinary income.

2. Defer Gains. If you have large highly-appreciated positions, consider deferring sales until future tax years. For a double whammy, donate the appreciated stock to charity and (1) avoid tax on your winnings, and (2) get a charitable deduction on the full donated value.

3. Asset Location. Most investors hold similar assets in their IRAs and their regular accounts. Instead, load up your tax-deferred accounts with income-generating assets (which are taxed at higher rates), and put capital-gain-generating assets in taxable accounts (where you can harvest losses and defer gains).

4. Avoid Mutual Funds. Many mutual funds trade frequently, which generates taxable gains -- including short-term gains taxed at the highest rates -- every year for their mutual fund investors. Investors have no control over when these tax liabilities are incurred. Indeed, if you're a recent investor in a fund, you can end up paying taxes on gains you never earned.

Personal Capital Advisors offers both tools and personal advisors to help investors tax-optimize their investment portfolio, including the automatic implementation of strategies like these. This year, don't pay more taxes than you should.

About Personal Capital
Developed by a team of high-tech and finance veterans, Personal Capital combines technology with personal service to create an entirely new way to manage your money -- all of your money, at all your banks and brokers. Our free service effortlessly gathers all your financial data in one place, and helps you take control of your financial life. To learn more, please call 855-855-8005 or visit

Contact Information