Planning to buy or sell investments this month? Time for a pause. A change in calendar year can make a big difference when it comes to the taxes you will pay, and when.

If you sell an equity-based or bond investment with unrealized capital gains before the New Year, you will trigger a tax liability for this year: 50% of the capital gain will be included in your taxable income. By holding off the sale until 2012, you could postpone the tax for another 12 months. What's more, the tax amount could be invested for another whole year.

Similarly, if you intend to buy an interest-bearing instrument, you can postpone tax on a full year's interest by waiting until the New Year to make the purchase.

Now, it's important to know that postponing these transactions is not always favourable. For example:

• If you expect to move into a higher tax bracket in 2012, it may be better to sell the investment in 2011 and have the capital gain taxed at your lower rate this year.
• If you expect the value of the equity investment to fall before the New Year, it may be better to lock in the gain sooner than later, even though it will trigger tax.

Another consideration is capital losses. If you have realized capital losses in 2011 or have losses carried forward from previous years, you may wish to sell an investment with unrealized capital gains before yearend and use the losses to reduce or even eliminate tax on the gain.

And remember, any capital losses you don't use this year can be applied to reported capital gains and related tax of the past three calendar years - 2008, 2009 and 2010. If you paid capital gains tax in 2008, this is your last year to offset them with capital losses and possibly even receive a refund!

Investment decisions should not be driven by tax considerations alone, but they are certainly one factor. Give our team a call to discuss your personal situation and help identify the best tax-savings opportunities for you.