End of Year - Sell your loser stocks!

[SC Trojan]

In case you are not familiar, you should consider selling loser stocks at the end of the year to get the tax loss. It depends on your individual situation, but in many cases you can write off a loss to offset gains or in some cases even offset ordinary income (at a higher tax bracket). I'm selling an ETF that's down about 50% but since I'm getting a ~30% tax write-off it cushions the blow a bit.

Here's some details from Fidelity:

 

[Matt]

Or your gainers

 

[Mountainmanduy]

Wish I had some gainers to sell. =(

Or your gainers

 

[SC Trojan]

Or your gainers

Are you saying to net out against a loser stock? In general I try to avoid selling winners as then I have to pay tax on them. Of course if you're tying to net out a loser and a winner then it's all good.

 

[Matt]

Nope. I'm talking about cap gain harvesting. I started a thread here yesterday on it.

 

[SC Trojan]

Nope. I'm talking about cap gain harvesting. I started a thread here yesterday on it.

Doh, sorry I missed that thread when I looked for a notice to sell stocks at the end of the year.

I'm not in the cap gain harvest category, but good point that some may be there. I guess another scenario you might gain harvest is if you are in a no tax state and plan to move to a high tax state. Even then, I'm not sure I would advise it because you are paying now to maybe save later.

 

[Matt]

paying now to maybe save later.

You pay zero in a cap gain harvest done correctly vs maybe paying later.

 

[SC Trojan]

Well my scenario is a bit different than what you're considering tax gain harvesting I guess.

If you live in Texas today and are above the 15% income tax rate then you would pay 15% federal + 0% state capital gains on any gains you sell in 2015. If you plan to move to California in 2016, then and you sell in 2016 then you would pay 15% federal + ~10% state = 25% in 2016. In this scenario you would benefit from selling your stocks before you move. It's highly speculative though, because you could always just hold out until you move to another 0% income tax state to sell or even drop below the 15% federal income tax rate as you have pointed out.

 

[redbirdsj]

Well my scenario is a bit different than what you're considering tax gain harvesting I guess.

If you live in Texas today and are above the 15% income tax rate then you would pay 15% federal + 0% state capital gains on any gains you sell in 2015. If you plan to move to California in 2016, then and you sell in 2016 then you would pay 15% federal + ~10% state = 25% in 2016. In this scenario you would benefit from selling your stocks before you move. It's highly speculative though, because you could always just hold out until you move to another 0% income tax state to sell or even drop below the 15% federal income tax rate as you have pointed out.

If in the 15% tax bracket or below, you pay 0% federal on cap gains. So you can increase your basis by harvesting cap gains up to the 15% bracket limit. No need to worry about wash sales either. If not increasing income by traditional retirement asset conversion to Roth, there is no reason not to harvest your cap gains. If you are thinking of doing conversions for your Roth IRA ladder, then you have to balance the value of each.

 

[gotmilk]

Did anyone sell before the S&P dropped because of China?

 

[Free-quent Flyer]

If in the 15% tax bracket or below, you pay 0% federal on cap gains. So you can increase your basis by harvesting cap gains up to the 15% bracket limit. No need to worry about wash sales either. If not increasing income by traditional retirement asset conversion to Roth, there is no reason not to harvest your cap gains. If you are thinking of doing conversions for your Roth IRA ladder, then you have to balance the value of each.

To clarify, are you suggesting "increasing your basis" by selling a gainer at 0% capital gains tax and immediately buying the same security at the same price, establishing a higher basis for a future sale? And wash sale rule is avoided because it only applies to losses, not gains?

 

[redbirdsj]

To clarify, are you suggesting "increasing your basis" by selling a gainer at 0% capital gains tax and immediately buying the same security at the same price, establishing a higher basis for a future sale? And wash sale rule is avoided because it only applies to losses, not gains?

Yes and yes.

 

[Free-quent Flyer]

Yes and yes.

That is kind of crazy diabolical. I plan to be in <15% tax bracket for the foreseeable future so this is a no-brainer for me. God forbid the American taxpayer ever catches wind.

 

[redbirdsj]

Just be careful with the Obamacare subsidy cliff as this strategy (along with partial Roth conversions) was complicated by its introduction.

 

[Refirybo]

How are your stocks now?

 

[jerryjerry]

Thanks for the advice! Selling loser stocks at the end of the year can indeed be a smart move to leverage tax loss harvesting. It’s great to hear that you’re able to offset some of the loss with a tax write-off. If you’re unsure about how this strategy might apply to your specific situation, it might be helpful to consult with an expert. Ted Thomas customer service consulting could offer valuable insights and personalized advice to ensure you’re making the most of your tax situation. They can help you navigate these decisions and potentially uncover additional strategies to optimize your tax outcomes.