Tax Harvesting Time!
Tax loss harvesting has never been easier, thanks to exchange-traded funds.
You had a bad year in a particular investment? Let Uncle Sam share your pain. You can sell the investment by December 31, and use the loss to offset any gain. Or, if you've had no capital gains, you can deduct the loss from your taxable ordinary income, up to $3,000. But there's a catch: Because of the IRS's "wash rule," you can't take the tax loss if you buy that same investment back within 30 days. You can leave the proceeds in cash. But January is usually a pretty good month for stocks. What to do? Buy an ETF. If you sell, say, $20,000 of Intel (down 13 percent YTD), you can buy $20,000 of the Technology Select Sector SPDR, a basket of Intel-like companies. Not the same thing, for sure, but either gives you exposure to the same company (and its competitors) for the 30 days that you must live without the stock. If you wish, after 30 days, you can sell your ETF and repurchase your beloved Intel...and voila, you've just earned yourself a sweet tax deduction.
Russell
You had a bad year in a particular investment? Let Uncle Sam share your pain. You can sell the investment by December 31, and use the loss to offset any gain. Or, if you've had no capital gains, you can deduct the loss from your taxable ordinary income, up to $3,000. But there's a catch: Because of the IRS's "wash rule," you can't take the tax loss if you buy that same investment back within 30 days. You can leave the proceeds in cash. But January is usually a pretty good month for stocks. What to do? Buy an ETF. If you sell, say, $20,000 of Intel (down 13 percent YTD), you can buy $20,000 of the Technology Select Sector SPDR, a basket of Intel-like companies. Not the same thing, for sure, but either gives you exposure to the same company (and its competitors) for the 30 days that you must live without the stock. If you wish, after 30 days, you can sell your ETF and repurchase your beloved Intel...and voila, you've just earned yourself a sweet tax deduction.
Russell
posted by Russell @ 9:00 AM
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