NEW YORK ( BankingMyWay) -- With Labor Day past, the kids back in school and summer vacation a memory, it's time to turn our attention to taxes.
Taxes? In September? With eight months until the next return is due?
Yes. Next April's return will cover income, capital gains, retirement savings and other
This annual issue is especially tricky in 2012 because the political logjam in Washington, and unpredictable outcome of the presidential and congressional elections, leave key issues up in the air, such as the tax rates for income and capital gains. So taxpayers need to be on their toes this fall, ready to make a move as the odds of a rate hike wax or wane during the campaign season.If nothing changes, tax rates will rise on income, dividends and capital gains with the Dec. 31 expiration of the Bush tax cuts of a decade ago. Democrats want rates to rise for the wealthy but not the middle class, while Republicans oppose any increase, though they've talked about ending some unspecified deductions. If rates do go up, they would apply to income, dividends and capital gains in 2013, not 2012. But the issue is important this year because taxpayers can use year-end tax moves to determine which year's tax rates will apply. If you had a profitable investment such as a stock or mutual fund, for instance, you could sell it this year to incur today's historically low 15% tax rate on gains, rather than wait until next year when the tax rate could be nearly twice as high. On the other hand, if that long-term capital gains rate did not go up, it might be better to hang on to the investment a bit longer, even if you were ready to sell for other reasons, because by selling after Dec. 31 you could postpone the tax bill a year. It's a dilemma, and most experts caution against letting the tax tail wag the investing dog. So, as a general rule, if you're happy with an investment, keep it. If not, sell. As summer fades and fall moves toward winter, keep a few basic principles in mind: