Money Minute: Microsoft Hits 'Back' on Windows; U.S. Middle Class Shrinks

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Microsoft goes back to the future.

Many computer users have had trouble adapting to Microsoft's (MSFT) Windows 8 operating system, so the company is coming out next week with an update that brings back some features of Windows 7 and Windows XP. For instance, you'll be able to hit the start button and get the traditional looking desktop. It's also bringing back the familiar "X" and minus buttons to close and minimize various programs. The company calls the updates Windows 8.1. You can call it Windows Classic.

The definition of what's middle class varies, but this much is certain: fewer and fewer Americans consider themselves to be part of that vast middle. %VIRTUAL-article-sponsoredlinks%A University of Chicago survey finds the number of people who place themselves in the middle class is now at the lowest level since it began measuring this 40 years ago. This has a very real impact on how much people spend, save and borrow.

Here on Wall Street, the Dow Jones industrial average (^DJI) gained 40 points Wednesday, closing within 4 points of its record high. The Nasdaq composite (^IXIC) rose 8 points, and Standard & Poor's 500 index (^GPSC) gained 5, moving to its second straight all-time high.

There are all sorts of theories about how to read the market, but one of the oldest is called the Dow Theory. It holds, in part, that when the Dow industrials and the Dow Jones Transportation Average (DJT) reach records at the same time, that's called confirmation and it signals more gains ahead. Well, the Dow transports are there and the industrials are very close.

Not much has gone right for Detroit lately. It's the largest American city ever to file for bankruptcy. But now a bankruptcy court judge has given the city the okay to borrow $120 million in order to buy new police and firefighting vehicles and make other purchases to improve urgent needs. The judge said the city isn't meeting "the basic needs of its citizens."

-Produced by Drew Trachtenberg.

7 Tax Tips for Investors
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Money Minute: Microsoft Hits 'Back' on Windows; U.S. Middle Class Shrinks
The 1099 forms you received from brokerages and other financial institutions might not be the last ones they send. It's common for them to issue corrected versions a little later. Consider getting your tax return ready to go, then waiting until close to April 15 before submitting it. That way, you can incorporate any last-minute changes and avoid having to file an amended return.
Pay attention to when you sell any holding, because the capital gains tax rates differ for long-term and short-term holdings. Short-term capital gains are taxed at your ordinary income tax rate, which could top 30 percent. Long-term gains (those held for more than a year) get preferential rates, which are zero percent for those in low-income brackets and 15 percent for most of us.
If you own underwater stocks, consider selling them for a loss. You can use those losses to offset gains from other sales, reducing your taxes owed. You can always buy back the asset later, if you still believe in it -- just be sure to wait for 31 days to pass, to observe the "wash sale rule."
If you're planning to sell one or more holdings that will give you a really big gain, submit an amended W-4 form to increase your withholding, or send the IRS an estimated tax payment. Underpaying your taxes significantly during the year can lead to a penalty at tax time. You may be protected by a "safe harbor" provision, though, which can save you from having to jump through those hoops.
If you're planning to buy shares of a mutual fund, determine when it will distribute its dividends. Many funds do so near the end of the year, and when that happens, the fund's share price will drop by the amount of the distribution -- which is taxable to shareholders. It's better to just wait until after that payout to buy in.
Mutual funds with high turnover ratios (reflecting a lot of buying and selling in a fund) have expenses for these trades. It's worth favoring funds with low turnover ratios, especially index funds and index-tracking ETFs, which simply hold onto the mix of securities in a given index, without a lot of trading activity. (Index funds generally outperform their higher-turnover counterparts, too.)
Boost the power of your Individual Retirement Accounts by making your annual contributions early in the year, giving the funds more time to grow. Over decades, it can make a significant difference.
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