Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Investor End of Year Tax Loss Harvesting and Other Strategies

Stock-Markets / Investing 2009 Dec 15, 2009 - 08:41 AM GMT

By: Nilus_Mattive

Stock-Markets

Best Financial Markets Analysis ArticleSince I’m not only doing the usual holiday running around, but also trying to prepare for an upcoming three-week trip to India, I’m acutely aware of just how hectic this time of the year can be.

But I also recognize that this is precisely one of the most important times for making moves that could significantly impact your finances, too.


I’m talking about relatively simple moves you can make that might otherwise get lost in all the other things on your personal task list.

For Example, Now Is the Ideal Time for Tax Loss Harvesting …

While the markets have certainly rebounded very sharply this year, you may still have a couple investments in your portfolio that are both underwater and likely to remain dead weight going forward.

If that’s the case, now is a great time to consider booking the losses in preparation for your 2009 tax return … especially if you’ve also bagged some gains this year!

Let’s start with a quick refresher on tax loss harvesting.

If you stop looking for a job, you’re not considered unemployed in the official data .
A little planning now can really pay off come April!

When you sell a position at a loss, the IRS allows you to deduct that loss come tax day.

It works like this:

First, if you also booked gains for the year, you’ll be able to offset them on a dollar-for-dollar basis with no limit.

Second, if you recorded more losses than gains — or no gains at all — you can use your losses to offset some ordinary income. The maximum amount is $3,000 ($1,500 if married filing separately) … but you can carry additional losses forward for future tax years.

Doing this before January 1 makes great sense if you want to rid your portfolio of some losing positions. You can get the tax break and reinvest the remaining money into more attractive opportunities.

Of course, even if you have underwater positions that you would like to continue holding for the long-term, you still might consider selling them at a loss for the tax advantage.

Reason: As long as you wait more than 30 calendar days before buying back those same positions, the loss will count on your tax form.

The IRS applies what is known as a “wash rule,” under which they will not recognize a loss if you’ve bought replacement stock within 30 calendar days before or after you sell your losing position.

However, if you wait 31 days, you’re fine and the loss counts.

Now, the real risk is that the stock could soar while you’re on the sidelines. In that case, you’d miss out on the gains. However, after such a strong run lately, I wouldn’t expect another spectacular surge over the next month or two.

Obviously, commissions are another factor. But if you’re talking about one or two positions — and using a discount broker — the tax writeoff will more than make up for the rather trivial costs.

So as the year winds down, take a good look at your portfolio and consider booking some losses.

Three More Year-End Steps to Consider …

In addition to tax loss harvesting, the end of the year is a great time to consider other measures that can have a big impact on your finances.

Here are three:

First, establish a budget, or review and update your existing one.

For example, around the end of the year, my wife and I will sit down and go over our expenditures during the past year, and set guidelines for our spending in 2010. While it won’t be the most exciting night of our lives, it may very well be one of the most important to our long-term happiness.

Second, review your overall investment portfolio to make sure it matches your goals and risk tolerance.

Again, given the recent runup in many asset prices, you will certainly want to take a little while to review whether or not your asset allocation still matches your original plan. And given the turbulence over the last few years, you might also decide that a complete overhaul of your portfolio is necessary for a sound night’s sleep.

Third, start thinking about new financial twists that the new year will bring!

For example, one strategy that I have advocated in the past is converting a traditional IRA to a Roth. I won’t repeat the benefits of doing so here.

But I would like to remind you that, beginning next year, anyone will be able to do this conversion — regardless of their annual income. Better yet, if you effect this change in 2010, you will be able to break up the income over two years for income tax purposes.

Bottom line: While I don’t think you should spend the holiday season obsessing over nickels and dimes, I do think it makes sense to take a little time to think about where your finances are coming from and where you want them to go in 2010.

You might even find that having a few days off from work, and having your family members all gathered in one place, makes the holiday season an ideal time for a quick discussion on topics that can really make a huge difference in your wealth and prosperity for years to come.

Best wishes,

Nilus

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in