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Time to Lock-In Your Losses!

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MJ DeMarco

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Folks as the end of the year approaches, now is a good time to analyze your portfolio and realize those loses to reduce your taxable income.

If you have stocks or mutual funds in the red, selling them will lock in the loss and reduce your taxable income. This is also a great time to rebalance and reanalyze your portfolio. However be careful as capital gains distributions are looming in the coming months as I wrote in this post.

A great example of this comes from my own experience. As I wrote in the other thread, I bought a house the other day and need to come up with $250,000 in cash. The source of this cash will be any investment sources that have LOSSES. This way, I reduce my taxable income by creating realized losses, yet, still come up with the money for my secondary home.

I'm sure Diane could add more to this topic, but paper losses don't reduce your taxable income -- only realized losses! If anyone is expecting to owe taxes, start selling those losses!
 

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Diane Kennedy

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Aug 31, 2007
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Folks as the end of the year approaches, now is a good time to analyze your portfolio and realize those loses to reduce your taxable income.

If you have stocks or mutual funds in the red, selling them will lock in the loss and reduce your taxable income. This is also a great time to rebalance and reanalyze your portfolio. However be careful as capital gains distributions are looming in the coming months as I wrote in this post.

A great example of this comes from my own experience. As I wrote in the other thread, I bought a house the other day and need to come up with $250,000 in cash. The source of this cash will be any investment sources that have LOSSES. This way, I reduce my taxable income by creating realized losses, yet, still come up with the money for my secondary home.

I'm sure Diane could add more to this topic, but paper losses don't reduce your taxable income -- only realized losses! If anyone is expecting to owe taxes, start selling those losses!

MJ: Thanks for the reminder. You're absolutely right.

If you have a capital loss and no gains, you can take $3K of the loss against your other income. So, if you have gains - take the losses NOW to offset all you can.
 

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