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Originally Posted by XLexusTech
Anyone have any opinions or even a formula for taking gains or taking losses for tax purposes?
Here is my situation... I have one stock and one municipal both traded in a post tax "Play" account... I am going to share the tickers because it will help ..
I have MUI which is a tax free Muni that can take a loss on.. and trade up for MUS.. I am down 38% on it..
I have COKE that I am up 198% on right now.. which I think is a good time to sell off some of it..
Is there a way to calculate how much of each would offset? Assume Coke is not subject to short term gains?
In a nutshell, is there any offset losses and gains strategies to help come april 15th?
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This is easy -- because tax harvesting is not complicated. If you want to be tax NEUTRAL - then sometime before December 31st -- you sell the loser (however much you want to sell).... and then you sell enough of the winner to zero that loss out. Or vice versa. Sell however much of the gainer to equal the amount of the loss you want to take. So if you have a loss sale of $1,000 (capital loss) - then sell something with a gain - where your capital gain is $1,000. Net tax neutral transaction.
Losses are capped at $3000.00 per year -- so if you just sold the loser --- and had a $9,000 loss - you'd have to carry the loss over a three year period...
For losses - there is no distinction between short and long term. That distinction comes if you have GAINS. So you can sell a short term loser and offset that loss with a long term or short term gainer if you want a tax neutral harvest.
But remember that you can't write off more than a $3,000 loss per year. So you can't earn $100,000 and sell a bunch of losers where you lost $50,000 - and think you're going to offset your income by $50,000. You'd only be able to write off $3,000 this year. This is why people that want to take some gains - but not incur the taxes - usually offset the gains with selling some losers. Then use the cash to re-deploy into other investments.
Your brokerage account should show you your "paper" gains and losses per position. And from there it should be pretty easy to do the math to calculate what you need to sell to make this all work out.