Here’s good news if you own a stock portfolio. (And if you’re a reader of the Tax Reduction Letter, I’ll bet you do.)
If you know how to play the game, you can turn your stock portfolio into a year-end tax-reducing machine.
The basics are really pretty straightforward.
- Avoid the high taxes (up to 40.8%) on short-term capital gains and ordinary income.
- Lower the taxes to zero—or if you can’t do that, then lower them to 23.8% or less by making the profits subject to long-term capital gains.
How should you go about implementing a money-saving tax plan? You’ll find out when you read my new article titled Tax Tips: 2019 Last-Minute Year-End Tax Strategies for Your Stock Portfolio.
Seven last-minute strategies you can use
to cut your taxes:
Strategy #1: Examine your portfolio for stocks that you want to unload and make sales where you offset short-term gains (subject to a high tax rate like 40.8%) with long-term losses (up to 23.8%). You’ll get the whole story when you read the full article.
Strategy #2: Use long-term losses to offset ordinary income. Again, you are trying to use the 23.8% loss to kill a 40.8% tax (or a 0% loss to kill a 12% tax if you’re in a tax bracket of 12% or lower). All will be explained when you read the full article.
Strategy #3: As an individual investor, avoid the wash-sale loss rule. Under the wash-sale loss rule, if you sell a stock or other security, and purchase substantially identical stock or securities within 30 days before the date of sale (or after the date of sale), you don’t recognize your loss on that sale. We’ll give you all the details when you read the full article.
Strategy #4: If you have lots of capital losses or capital-loss carryovers and the $3,000 allowance is looking extra small, sell additional stocks, rental properties, and other assets to create offsetting capital gains. Everything will be explained clearly when you read the full article.
Strategy #5: Consider giving appreciated stock to your parents and your non-kiddie-tax children. Here’s why. If your parents or children are in lower tax brackets than you are, you’ll get a bigger bang for your buck by gifting them the stock, having them sell the stock, then having them pay taxes on the stock-sale at their lower tax rates. To get the full details, read the full article.
Strategy #6: If you’re going to make a donation to a charity, consider giving appreciated stock rather than cash. A donation of appreciated stock gives you a greater tax benefit. You’ll win and the charity will win. You’ll get the whole story when you read the full article.
Strategy #7: If you could sell a publicly traded stock at a loss, do not give that loss-deduction stock to a 501(c)(3) charity. Why? If you sell the stock, you have a tax loss that you can deduct. If you give the stock to a charity, you get no deduction for the loss. All will be explained when you read the full article.