2016 Last Minute Year End Tax Strategies for Your Stock Portfolio

12/29/2016

With the end of the year approaching, I would like to review how you can make use of your stock portfolio to lower your tax bill. I will briefly discuss seven tax strategies that you can use to your advantage.

First, let’s go over some background information. Your short-term capital gains are taxed like ordinary income. This means you pay federal taxes at rates of up to 43.4 percent: the top income tax rate of 39.6 percent plus the 3.8 percent Affordable Care Act tax on investment income. You pay taxes on your long-term capital gains at rates of up to 23.8 percent (20 percent for capital gains plus 3.8 percent on investment income). And if you are in the 15 percent income tax bracket, then you pay zero taxes on long-term gains.

The goal of the strategies below is to avoid the 43.4 percent tax, and instead pay tax at the 23.8 percent or even the 0 percent rate when possible.

Use Low Taxes to Offset High Taxes ---- Examine your portfolio for stocks that you want to unload. When you sell stocks subject to short-term gains (with a tax rate as high as 43.4 percent), also sell stocks subject to long-term losses (with a tax rate up to 23.8 percent). With this, you offset the gains with the losses. In other words, make the high taxes disappear by offsetting them with low-taxed losses, and pocket the difference.
Use Losses Against Ordinary Income --- Use long-term losses to offset up to $3,000 of your ordinary income. Again, you are trying to use the 23.8 percent loss to kill a 43.4 percent tax.
Use Extra Losses as an Opportunity for Free Gains ----If you have plenty of capital losses, use this opportunity to sell some capital gains assets so as to create tax-free gains. For example, sell additional stocks, rental properties, and other assets to generate gains that offset your capital losses.
Avoid Wash Sales
Gift Stock Instead of Cash
Donate Stock to Charity
Never Donate Loser Stocks

Please contact me if you would like to discuss any of the strategies above. I look forward to hearing from you.

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Important Disclosures

Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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Author

Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.

Keana founded this website and decided and created this blog page to offer a space for those seeking knowledge to understand, however not to be confused with advice or planning strategies.

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