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Take my losses to wipe out taxes?

As 2013 ends, I'm wondering if it's wise to take enough of my losses to wipe clear any net gains and then avoid tax. Is there a maximum amount of net losses I can deduct from 2013's taxes? Is this wise?

Dec 12, 2013 by Bryan from Philadelphia, PA in  |  Flag
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3 votes

STG - $1500 STL - $2500 Net STL $1000
LTG - $2000 LTL - $1500 Net LTG $500

You end up with a short term loss of $500 This is an example of the netting process. So you want to be sure whichever way you decide to go that you are selling the right types of gains or losses to accomplish your goals. Good Luck!

Comment   |  Flag   |  Dec 13, 2013 from Bloomington, IL

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You do have the ability to shelter gains by taking losses. Just remember that short-term losses go against short-term gains first and long-term losses go against long-term gains first. Then they are netted. If your losses exceed your gains you can deduct up to $3,000 against ordinary income. If your losses exceed your gains by more than $3,000 the excess carries forward to future years.

Whether it is a good idea depends on the facts and your particular situation.

Comment   |  Flag   |  Dec 13, 2013 from Alexandria, VA

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Bryan, The other advisors have given you some good advice. I wanted to point out one other option. If you still like an investment that you hold but have a loss on the position you can it now to recognize the loss and purchase it back in 30 days from now. This is called the wash rule and if you do this ensure that you wait at least 30 days before you repurchase the investment other wise it will impact your cost basis.

Comment   |  Flag   |  Dec 13, 2013 from Leawood, KS

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To add to the previous inputs, also be aware that if you own mutual funds be sure to include any capital gain distributions they may be adding to your gain side before year end, so you are not surprised thinking you took enough loss to offset your gains only to find that in fact you did not. Some investment companies pay those as late as the last day of the year, but almost all give pre-distribution information on their websites so you can prepare. A phone call also works.

Comment   |  Flag   |  Dec 13, 2013 from Peoria, IL

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Same topic, and not to offend your intelligence but just to clarify and possibly save you some time, capital gains declared and paid through investments held in IRA's are obviously unnecessary to offset as there is no tax consequence for capital gains or income distributions in IRA accounts.

Comment   |  Flag   |  Dec 13, 2013 from Peoria, IL

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