Get Extra Pop Out of Your High Fliers

BOSTON (TheStreet) -- The bull market that began in March was a relief from the six-month decline that wiped out more than a decade's worth of investment gains. But as the S&P 500 Index has surged more than 50% since then, now it's time to consider a tax strategy that can save you thousands.

Apple's(AAPL Quote) impressive run, for instance, would lose some of its pop after the tax drag. If an investor in the 28% tax bracket purchased Apple on Jan. 1 at $85.35 and sold after the third quarter's earnings announcement at $198.94, a return of 133% would shrink to 96% after taxes.

If the same investor waited until after the new year, he would be better off. Investments held longer than one year are taxed at the long-term capital-gains rate of 15% for those in tax brackets of 15% or higher. Even if Apple tumbled by $15 a share in the intervening time, the investor would still come out on top by waiting. Selling at $183.94 with the long-term capital-gains rate would lead to an after-tax return of 98%, almost 2.5 percentage points more than selling before year-end. That effect would be even more dramatic for investors in a higher tax bracket.

Of course, that's only an issue for investments that produce gains. General Electric(GE Quote), Wal-Mart(WMT Quote) and ExxonMobil(XOM Quote) have fallen this year. While GE's dividends just about make up for stock-price losses, Exxon and Wal-Mart will produce a chunk of capital losses that investors can use to offset gains in other investments.