As part of your year-end tax planning, tote up your gains and losses for the year. If trades to date have resulted in a net gain, take a hard look at the securities still in your portfolio that show paper losses. Maybe now is the time to unload some of those stocks, using the loss to offset the gain and reduce your tax bill. Keep in mind that you cannot deduct a loss on the sale of securities within 30 days before or after the sale. The loss on such a sale (called a "wash sale") is added to the cost of the securities you buy.
On the other hand, if your sales so far this year have produced a net loss, perhaps you should consider some year-end profit-taking. Remember that only $3,000 of net losses a year can be used to offset income other than capital gains, with the tax value of extra capital losses postponed to future years. However, you can benefit from such losses this year by taking gains up to the amount of your losses.
Don't let the search for tax savings lead you into bad investment decisions. Your investment goals must be your primary concern. But if a particular investment is on the sell-or-hold borderline, consider the tax consequences of the sale.
Return to Advice & Learning
