Are you planning your year-end stock portfolio? If not, there’s a very good reason you might want to do so—it can end up paying off! As long as you know how to handle your stock portfolio wisely, you can come up with a smart year-end tax strategy.
Your goals are to steer clear of the higher taxes on ordinary income and short-term capital gains while getting your taxes as low as possible. Here are some strategies you may want to adopt in order to do just that:
- Sell off any stocks you do not want to keep, making sure that you are balancing out any short-term gains with losses that are subject to low taxes.
- There is a $3,000 deduction that is permitted for ordinary income, and you can use your long-term losses to account for that deduction.
- If you sell any of your stock, you will need to wait for more than 30 days to purchase the same stock in order to avoid falling into the wash-sale loss rule, which obligates you to include your loss in the new stock.
- If your $3,000 deduction isn’t enough, you can sell off additional stocks and assets to generate some additional capital gains for your portfolio.
- If you support your parents or children, you can gift them appreciated stock, let them sell it, and then have them pay the taxes on it—keeping in mind that they are likely paying lower tax rates than you are!
- By the same token, using appreciated stock instead of cash can also be advantageous to you when you’re making a charitable donation.
- If you have stock that you can sell at a loss, sell it rather than donating it—if you donate it, you won’t be able to claim it as a deduction. After you have sold the stock, you can then use the resulting cash as your donation!
When you need help with your taxes, you can turn to The Royce CPA Firm for the quality accounting services you deserve. You can set up an appointment at our Tucson office by going to our website and filling out our online form.