Preparing for 2020 taxes stock profits and losses
I never traded as much as I have in 2020. This is a taxable account
Example: I made $12000 or 30% as of September 2020 with potentiL losses if I sold of $5000 if I sold these stocks.
Using this example should I sell,reduce my tax liability to $7000 @ my aprox 10% tax rate
Ps Ialready have beaten these numbers so far in the 4Th quarter.
What do you recommend.
Terry Says
I’m glad you’re planning now. If you want to “harvest” a tax loss to offset gains, you must wait 30 days to repurchase the same security! I suggest you square up your positions right now — adding up all gains and all losses. Then sell enough losses to offset your gains. Otherwise the losses will be basically useless (you can deduct $3,000 per year against ordinary income and carry the unused losses forward). But the gains will be treated as ordinary income and could increase your tax bracket. That’s assuming that all these trading events were “short-term” with the securities held for less than one year.
Of course, you may have other tax and tax bracket considerations. If so, consult your tax preparer. But those are the basics. You would be wise to offset those gains with losses this year, since there is a possibility that tax rates will rise next year under a new administration and Congress.
