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Sell securities to harvest capital gains

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in Small Business Tax,Small Business Tax Deduction Strategies

No, that headline is not a misprint. Normally, investors look to “harvest” capital losses when the stock market has climbed, to offset any capital gains they’ve recently realized. But this tax year is far from normal, so you might do the opposite of the usual.

Strategy: Sell securities that will produce long-term gain. Even if you show a large net gain for the year, you’ll benefit from the maximum federal capital gain tax rate of only 15%. The maximum rate is scheduled to increase to 20% in 2013.

What’s more, other tax rate in­­creases that are supposed to take effect next year could make 2012 the optimal year to pull down capital gains.

Here’s the whole story: For tax purposes, your gains and losses from dispositions of capital assets—such as stocks, bonds and other securities—are “netted” together at the end of the year. So your capital gains and losses can effectively cancel each other out. To the extent you have an exces...(register to read more)

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