Turning an Investment Loss into a Tax Gain

The IRS knows that the only way they will make money is if you make money. They offer numerous deductions and credits to help you invest and reinvest your income. The only thing they ask in return is for you to be a little savvy in how you make those investments. Everyone knows these days, with the stock market acting like the roller coaster, making the right investments can be a little hard. So it's only appropriate that we look at a few ways to save you taxes when you lose money on your investments.

  • Don't forget the wash-sale rule. Don't rebuy the same stocks you dumped because they were losing money within the 30 days that you dumped them in. If they go up and become attractive again wait till the 31st day or you won't be able to write off the losses.
  • According to the IRS, you can write off your losses equivalent to your gains for that tax year. Just remember to do it before December 31st. If you losses were $11,000 for the year and gains were $10,000, you can write off $10,000 in losses.
  • The $1,000 that was left over from the above can be still be written off as unused losses against ordinary income. IRS gives you a maximum of $3000 to be written off.
  • Try using the short term gains that you made on your investments rather than the income gains on investment shares that are more then a year old. The reason is gains on investments less than a year old are taxed at 41% and gains on investments older than a year are taxed at 20%.