Being and individual taxpayer there are several rules & strategies to keep in mind when planning your capital gains and losses. 1st Short term capital gains & ordinary income are taxed at rates up to 35 percent. A strategy to offset the gains would be with long term losses, i.e. kill the 35% taxes with 15% losses. 2nd Long term capital gains are taxed at rates of up to 15 percent (0% if you are taxed at a regular rate of 15% or less). The strategy is to have long term losses create the $3,000 deduction allowed against ordinary income. You are trying to use the 15% loss to kill the 35% tax or a zero percent loss to kill a 15% tax. 3rd If your capital losses exceed capital gains, you may deduct up to $3,000 and carry forward your unused losses. The strategy if you have a lot of capital losses and the $3,000 allowance isn’t going to cut it, sell assets to create offsetting gains. 4th Long term gains and losses are offset before application against short term gains and losses. The strategy as an individual investor is to avoid the wash sale rule. If you sell stock or other security and then purchase substantially identical stock or securities within 30 days before or after the date of sale, then you many not recognize any loss on that sale. Therefore if you want to keep the identical stock position but also recognize a loss you will need to roll the dice for more than 30 days.
Please stay tuned over the next few weeks for more last minute tax planning tips. We will discuss other ways you can impact your 2012 taxes ranging from reimbursing Section 105 medical expenses, setting up or making 2012 retirement plan contributions, buying or selling a vehicle, and much more.
Please feel free to contact Harvey and Caldwell, PA at 913-451-4400 or visit our website https://www.harveyandcaldwell.com/ as a resource for your tax needs.