Tax tip (stocks)...

st8

st8

Registered Users (C)
YOUR MILEAGE MAY VARY. Check your scenarios a bit further.

1. For those of you with stocks with a loss (and no foreseeable improvement in the future), try selling before 31 Dec. For a $3000 loss, you should get approx $900 for the average filer. If more than $3000 in losses, you can carry the loss forward to the years ahead at 3K loss per year.

2. For those with both profitable and loss making stocks, you can sell to gain profits and compensate with losses to avoid capital gain taxes. For example, if you had a stock (A) with a 10K profit and a stock (B) with 5K loss, you could sell part of A to make 5K in profit and B for 5K loss and not pay tax on A's capital gains.

Or if A is 10K profit and B is 16K loss, sell both to get net 6K loss (or 3K loss). 3K loss for this yr (.9k return) and 3K loss next yr.

3. If you really like a stock (ABC) but have lost lot of money in it (big % drop) but say you still want to hold it in the future. If you also do not expect no big changes in the next 2 months, sell at least 3K in losses for tax benefit. Then buy it back after 31 days (very important: Do not get caught in the Wash Sale).

4. For those interested in filing with software, Staples, OfficeMax, etc. have almost free TurboTax/Taxcut software along with lot of free software after mail-in-rebate (also deluxe, platinum versions give free e-file state s/w). You also get additional $30 off $150 (staples: code: 79991, 73796) for these sites at various deal sites.

Good Luck.
 
st8,
I invested $2900 in one stock and lost all the money and now i do have worth it of 500. If i sell those stock how much money i will get it back when i submit my tax returns.
Thanks in advance.
 
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For average filers (I believe the 28% tax bracket or I think it has been reduced to 25%), for a 3K loss one gets about $900. So, you many get (2900 + 40 (buy/sell expenses) - 500 = -$2440) somewhere about $700 in return.

Effectively net federal tax income will have these losses deducted. If federal taxable income is 80K, you would pay tax for 80K-loss. (2440 *.25 (or .28), I assume)

You could figure out the exact amount by estimating/calculatin gusing any of the tax filing software with and without the losses. You may even be able to estimate now if you can look up your most recent pay stub and enter you income, taxes, paid, etc. (for standard deduction)
 
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tyzh: It is a standard tax practice. Go to any major financial site and they suggest this method. If you bough a stock at 100 and it is at 20, it is 80% loss but to get back to 100, it has to have a 400% gain which may not happen.

The tax sop is only for $3000 and can be played a bit if both gains and losses exist. Speak with a tax or financial adviser, they would definitely advise this.
 
tyzh,

I think you have taken st8's advice to mean that one has to sell in order to have a tax break! If that is not the case, I apologize for misunderstanding your post.

But, if otherwise, I don't think st8 is advocating that! I don't think he is saying sell the stocks that have depreciated in value in order to gain a tax break. I think his point is if you have depreciated stock that has no prospects of improving in the near future, then sell it and enjoy the tax benefit.

For example, if stock A, based on the past curve, is not likely to swing up in the next 40 days or so, you might as well sell it, get the tax deduction for the thousands you invested and then buy it back in 40 days!

This strategy would best suit the holders of stock which are now trading in pink sheets or have been completely liquidated.

Bottom line is "never sell for tax benefits but if you are planning on selling, plan the timing and look at the tax advantage".

One good article, among many, can be found at www.motleyfool.com . Search for "capital gains and losses"
 
Originally posted by prajaram
Bottom line is never sell for tax benefits but if you are planning on selling, plan the timing and look at the tax advantage
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Click to expand...
 
I thought you got to have Capital gain as well as Capital loss in order to be able to take such type of advantage. Meaning capital loss (stocks, bonds, interest etc) can only be offset by Capital gain and not againts ordinary income for e.g income tax incurred due to wages can not be offset by Capital loss.
ST8 and others please clarify. Thanks
 
Indiatoday,

Capital losses are usually used to offset Capital gains. Yes! But, in the absence of capital gains, capital loss could be used to offset taxable income, to an extent! And, this extent, as it stands today, is $3000 per year.


For example, assume you incurred capital losses worth $6500 in tax year 2002. If you did not have any capital gains, you can reduce your regular taxable income by $3000 in year 2002. That leaves you a balance of $3500 in unclaimed losses. In tax year 2003, you can deduct another $3000 and the balance, $500 in tax year 2004.

Hope this helps. Check out the motley fool article.
 
Re: Alien labor:

Do u know, when one can deduct $8K. Is it applicable for the yr 2002.

It seem that $3K is very little in these down markets.

Any thoughts?
 
No one needs to sell stocks just for tax reasons. But revisit your portfolio and check if one can gain any tax benefits if you have losses and gains and do not foresee any upside.

As of now, I still think the losses that can be written off is $3000. May be in the future it could be $8000. But then, that is definitely not the way to go about investing and tax write-offs.

Anyway, you hardly have 2 days to make your sale for tax adjustments if you already haven't done it. Atleast some losses can be lessened this way.

tyzh: In investing, one should know when and how to buy and also when and how to sell. Lot of people in the past 2 years rode their investments, vested stock options and 401K all the way down to tremendous losses just waiting for a rebound and past glory which never happened (which may also take 7-10 years if not longer to get back where it was). Some of these people could have had 20-30% losses instead of 50+% losses and lose their lifetime savings. Remember a 80% downturn needs a 400% uptick to compensate. Just holding (and hoping) blindly does not work and one needs to revisit their portfolio once in a while.

prajaram: You got it right.

A sample from fool.com : http://www.fool.com/taxes/2000/taxes000107.htm

Good Luck.
 
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St8,

You have done nice job opening this thread, I think this one has been useful and productive discussion even if it was not immigration related. Thanks you all for your contribution.
 
I file my taxes using standard deduction.. Can I still take advantage if I sell now? I guess, you are refering to itemised deduction cases? Please advise!

Thanks.
Abhi2002.
 
Hire a good CPA

It's always better to itemize if you have lots of taxable expenses like mobile phone, books, training, stocks, driving milage if you are a consultant and go to the client site for work. etc.
Hire a good CPA, He will do it properly. Don't go H&R block. There is no difference doing from HR block and doing yourself.
 
I file my taxes using standard deduction.. Can I still take advantage if I sell now? I guess, you are refering to itemised deduction cases? Please advise!

Thanks.
Abhi2002.


Can anyone answer to above Please
 
Re: Abhi/IndiaTodya:

Yes, u can still deduct the capital loss even if u file under std deduct'n

Also note, u shouldn't buy back that particular stock within 30days from the sale date or else u cannot deduct it.


Pls contact a CPA/tax consultant......
 
Be a small business owner and

buy a BIG luxury SUV like Lincoln, Range Rover, Ford Excursion etc. and get a tax break at the expense of all of us.
Small loophole in the laws that suggest small to mid size trucks for small businesses are being misused and causing loss of millions to the exchequer (our hard earned money that is forced to be paid as tax).
 
Abhi2002/IndiaToday: Irrespective of the type of deduction, you can claim the losses (or adjust against gains if you have any). The losses could have resulted from a stock sale this year or the past years.You can claim (as of now) a deduction of upto $3000 per year.

Itemized deductions usually yield better tax deductions if you are more into independent consulting and/or own a house. For regular salaried employees and living in rented residences, the standard deduction most often is better than the itemized deduction. Still you can try to estimate both approaches using the software available at various tax filing websites.

If you own property/business and are into contracting, it may be a good idea to consult a CPA than HR block (at least once) to see if it makes a reasonable difference. You would be amazed that in some cases people can even write off their Wall St Journal/magazine subscriptions.

As priyagc mentioned, never buy back the same stock you sold within 31 days as it constitutes a Wash Sale and would create a complex/complicated tax filing.

Good luck and also wish you that 2003 onwards you are showered with capital gains alone. ;)
 
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