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Comprehensive Tax Guide for Investors

When tax planning season comes close, many individuals rush to tax experts to minimize their tax liabilities. Most of the times, it is observed that tax payers end up paying higher taxes than they are obliged to pay. Though lack of time to conduct proper tax planning is a reason, this can be also attributed to unawareness among tax payers about different rebates, allowances and deductions available under the Income Tax act. There is a strong need for tax payers to devote sufficient amount of time and efforts to aware of tax benefits which they can avail. Here we have listed some useful tax planning tips which will guide tax payers to lower their tax liabilities.

Determine whether you are Investor or Dealer

The first and foremost important step is to determine your status as an investor or dealer for tax purpose. Normally, capital gain or loss takes place when an investor sells his assets, while ordinary gains or losses occur when a dealer liquidates his assets. Advance planning can definitely help you to take proper decision on liquidation of your assets. The procedure to determine difference between an investor and dealer is completely subjective. So, you must analyze your facts and figures carefully to determine your position.

Acquire Adequate Knowledge

An important thing an individual has to understand is that individual taxes come in various forms. They can be classified into federal tax, state tax, local tax and income tax. Normally, all types of taxes are drawn from investments, wages, gifts, entitlements, inheritance and estate. So you have to understand your all deductions before starting with a tax filing procedure.

Timing Income and Expenses

Before end of each tax year, tax payers get an opportunity to save considerable amount of taxes by taking deduction and spending his money on some specific items. This idea helps you to analyze all tax saving possibilities by timing your income and expenses in proper manner. When you reach to the end of the tax year, you have an option of calculating your income in existing or next year. If you add your income in a year of lesser profits then you can minimize your taxes to significant extent.

Minimize Taxes by Pre-Paying or Stocking Up

You can augment your expenses by stocking up on inventory or by pre-paying for expenses. You can also utilize your entire credit line for purchases and stocking up on supplies. One best strategy will be to take deduction in a year when profits are higher. You can also consider pre-paying your mortgage or rent. If you are opting for this option then ensure that you are drawing down your principal besides additional interest.

Consider Capital Loss Carryovers

Investors can also utilize their capital loss carryover to compensate their capital gains in a specific year. Capital loss carryovers become highly valuable when tax payers enter next year. Any capital losses carried over to next year can help you to offset capital gains which are taxed at higher rates. So you may prefer to carryover your capital losses to later years rather than sticking to strategy where all capital losses will be absorbed in single year.

Keep your all Accounts well organized

Though it may appear bit trivial but keeping your accounts and paperwork in organized way before filing your taxes can create huge difference in your savings. Accounting firms also charge lesser amount of fees if you have kept your account and all necessary paperwork well maintained. A well organized account also makes sure that you are taking complete advantage of your all deductions.

Harvesting your Losses

You can also consider an option of tax-loss harvesting by selling securities in your portfolio at loss and considering all your losses to offset taxable capital gains. This technique helps you to exploit market volatility for your own benefit and share some part of your losses with government. As no one can control and predict the market volatility, you have to keep your eyes open throughout the year in order to utilize the benefit of a technique called ‘tax loss harvesting’.

Try to File Your Taxes Personally

Filing your taxes on your own is extremely cost effective as you don’t have to hire any professional consultant to do it on your behalf. However, it is one of the effective cost saving tips which is difficult to achieve. You can take help of software and research on all tax filing steps properly to pass through entire tax filing process smoothly. In initial time, it will be definitely challenging but ones you comprehend all the concepts properly, your task will be as easy as pie.


Taxes can create substantial influence on the net return of investors and careful asset management can definitely help you to reduce your tax burden up to significant extent. Every tax payer has his own circumstances and investors must consult to their tax consultant to determine the strategy which is best fit to their financial status and investment objective.

You can stick to a strategy which tells you to complete all the calculations before proceeding for the final tax filing process. You can take help of software program or download tax calculators from some reputed sources which will do all the tax estimations for you. After obtaining final figures, make sure to understand their proper interpretations. If this is extremely overwhelming for you then you can hire a tax expert who can do all necessary work for you.


3 responses to “Comprehensive Tax Guide for Investors”

  1. Integrator says:

    I’d love to be able to do my own taxes, but my foreign sourced income, deductions from leverage, property expenses etc make the whole thing quite messy. I also input as much as possible and let an agent check and finish off the job.

  2. Nice overview. Taxes kind of scare me, but I’ve done my own now for the past few years so it’s a bit less overwhelming. It can get pretty confusing pretty quickly if you’re not careful. Luckily, my wife and I have very simple returns to file at this point.

    • Martin says:

      My taxes are a bit complicated due to my participation in a few businesses and partnerships, plus job, plus investments, so I always do my tax preparation with an H&R Block agent, who is already trained with me for those years he has been doing it (so he no longer shakes head when I empty my box full of all sort of bills and receipts on his desk. I also learned myself how to prepare it as much as possible for him to review…

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