Tax-savvy investors often “harvest” capital losses from securities sales to offset capital gains. But this year the shoe may be on the other foot.
Strategy: Look to harvest capital gains. In particular, you might trigger long-term capital gains that will be taxed at rock-bottom rates.
With uncertainty surrounding potential tax reform in the near future, now may be a good time to cash in your chips.
Here’s the whole story: For federal income tax purposes, gains and losses from dispositions of capital assets—such as stocks, bonds and other securities—are “netted” at the end of the year. So your capital gains and losses can effectively cancel each other out. To the extent you have an excess capital loss for the year, it can be used to offset up to $3,000 of ordinary income. Any remainder is carried over to the next year.
If you show a net long-term gain (i.e., from sales of capital assets you’ve held longer than one year), you ...(register to read more)
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