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Learning, Sharing, and Teaching => Investor Alley => Topic started by: dragonwalker on July 22, 2015, 02:54:49 PM

Title: Question about Capital Loss
Post by: dragonwalker on July 22, 2015, 02:54:49 PM
I'm looking to consolidate some of the stock positions I have. I have several stocks that have held onto the last few years which are deep in the red. I haven't bought or sold any share yet this year and I wanted to make sure what I am doing makes sense.

I'm thining of selling these (long term over 1 year) loser stocks to take the capital gains loss from my ordinary income and next year sell some of my profitable stocks to pay long term capital gains rather than have my profits ofset my capital gains loss during the same year. This way I figure I will pay about 10% less taxes since I'm in the 25% tax bracket. Does this make sense?
Title: Re: Question about Capital Loss
Post by: schimt on July 23, 2015, 10:13:28 AM
I'm not sure i follow your plan exactly, but these two articles from the Mad Fientist may help adjust your planning?

http://www.madfientist.com/tax-loss-harvesting/ (http://www.madfientist.com/tax-loss-harvesting/)
http://www.madfientist.com/tax-gain-harvesting/ (http://www.madfientist.com/tax-gain-harvesting/)
Title: Re: Question about Capital Loss
Post by: zephyr911 on July 23, 2015, 10:44:31 AM
I'm looking to consolidate some of the stock positions I have. I have several stocks that have held onto the last few years which are deep in the red. I haven't bought or sold any share yet this year and I wanted to make sure what I am doing makes sense.

I'm thining of selling these (long term over 1 year) loser stocks to take the capital gains loss from my ordinary income and next year sell some of my profitable stocks to pay long term capital gains rather than have my profits ofset my capital gains loss during the same year. This way I figure I will pay about 10% less taxes since I'm in the 25% tax bracket. Does this make sense?
Basically, you're saying you want to derive a greater benefit from your capital loss by using it to offset ordinary income instead of using it to offset capital gains that would be taxed at a lower rate. Yeah, all else being equal, this makes sense. I can't guarantee you the expected results without knowing your entire situation, including any possible changes from this year to next (like a raise and a higher tax bracket), but the theory is valid.
Title: Re: Question about Capital Loss
Post by: seattlecyclone on July 23, 2015, 06:40:46 PM
Yes, if you only sell losers this year, the first $3,000 of that capital loss will count against your ordinary income and thus save you the tax on up to $3,000 worth of income at your current marginal tax rate. Then if you sell the stocks with gains next year, you'll first cancel out any capital loss carryover from this year (if you had more than $3,000 of losses) and then will pay long-term capital gains tax on any surplus. Since your capital gains rate is lower than your regular tax rate, realizing the losses in one year and the gains the next can be a good way to save money on your taxes.