The stock market has been slammed this year. It may be time to cut your losses before December winds down.
We all know the stock market has suffered mightily but there may be a consolation prize out there after all. For some investors, a tax loss that can help them offset their income.
Take the time to review each of your owned. stocks. Is your portfolio weighed down by a dud? Well strongly consider selling that loser.
The good news is that you can use the loss on the stock sale to offset capital gains generated elsewhere in your portfolio. Once that’s done, investors can write it off against up to $3,000 in ordinary income.
Sadly, the stock market is down more than 40 percent this year. Some investors may be quite surprised to discover that they will owe taxes even as the value of their investments has spiraled downward. How can this be you ask?
Some investors who sold stocks earlier this year when the markets were much higher might see short-term relief turn into big disappointment when their tax bill arrives in the mail early next year.
That’s a big eye opener, to find your portfolio down 40 percent but you’ve actually got a 10 percent capital gain. Surprise!
The fact is this …. many of us hold on to losing investments hoping and praying to someday recoup your costs. But a smart investor will utilize a better strategy. Take the plunge and sell those loosing stocks at a loss. Then take the income tax break, don’t look back and move on to a better investment.
There is a word of caution for those out there considering doing this. You can’t sell your shares, take the tax deduction, then buy back that same stock within a 30-day period. According to IRS tax law, that would violate “wash sale” rules.
As always, please consult with both your tax and investment professionals for legal advice.
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