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: 2020 Last-Minute Year-End Tax Strategies for Your Stock Portfolio.
Here are three of the seven last-minute strategies you find in the article and 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: 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 #3: 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.