• Basics
• Mutual Funds
• Retirement
• Stocks & Bonds

Basics:

Turning an Investment Loss into a Tax Gain

The IRS knows that the only way they will make money is if your client makes money. They offer numerous deductions and credits to help your client invest and reinvest their income. The only thing they ask in return is for your client to be a little savvy in how they 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 your client taxes when they lose money on their investments.

• Don’t forget the wash-sale rule. Don’t buy back the same stocks that your client dumped because they were losing money within the 30 days that they were dumped in. If they go up and become attractive again wait till the 31st day or your client won’t be able to write off the losses.
• According to the IRS, your client can write off their losses equivalent to their gains for that tax year. Just remember to do it before December 31st. If your client’s losses were $11,000 for the year and gains were $10,000, they 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 taxpayers a maximum of $3000 to be written off.
• Try using the short-term gains that your client made on their investments rather than the 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%.