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awill110 | Should I sell some of the stocks that I have lost money on to counter the stocks I sold for profit for taxes? |
I purchased some stocks in January and I have sold some of them throughout the year. I have made a profit of $1200 on the stocks that I have sold so far this year. Should I sell some of the stocks that I have lost money on to save myself money in taxes, and if so how much should I sell? |
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drabsbrad
 |
sell it all... |
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The Joe
 |
Forget taxes. You should sell a stock if you think any other investment will make more money than the stock you own in the time period you want to invest for. If you can earn more money in B than A, then you should sell B and buy A, regardless of what your cost is in A. |
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Kiker
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I wouldn't.
If these are short-term (>365 days) gains you are looking only at 35% (<365+ days) of that amount, which isn't much. You would likely still have some kind of a refund that will offset that. If its long-term gains you are only looking at 15% in taxes on the gains.
What I do is just hold off on trying to get a decrease in your taxes owe, as this is an ugly way to pay your taxes. Compile your taxes ASAP. Then see where you are with regards to your bill. If you have to pay, than wait until the time is right on the stocks you own and take some off the top to cover your tax bill. Its always better to take a gain, instead of a hit. |
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roderick_young
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Congratulations on your profit.
If you believe certain stocks you have are not going anywhere, it's prudent to sell them. However, if your only reason for selling is to "save" taxes, then it's pointless. Losing money is a poor way to avoid taxes.
Also, you haven't really lost the money until you sell.
Consider also, that by holding stock for over a year (assuming you're in the US), you will pay only 15% capital gains tax on your profit, or even less, depending on your tax bracket. You might be able to save taxes by just holding your winners longer. |
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SunshineAllDay
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Depends on what stocks lost money -- if they are companies that are not well known or having major problems, it would be wise to dump them, but if they are just down, they may come back up, and besides $1200 is not that large of a hit for taxes |
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Harold Sink
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If you lost money on stock you should get the value back in taxes. As long as you own the stock you still are a part of that company. When it goes up again, you can sell it or not. Just because it went down doesn't mean it will stay down forever. |
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qu1ck80
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I'd only sell if you don't think that those stocks will still go up. If you don't have a good feeling about one or two stocks, then by all means sell. But don't sell just to try to reduce your taxes. You may end up missing a big gain in something.
Think back on your reasons for purchasing those stocks in the first place. If your thesis is still valid, it probably is a good idea to hold on to them. |
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Dave
 |
Basic Rule: its not how much you make, its how much you keep.
That said, your $1200 profit could be lightly taxed (low income bracket and low/no state tax) or you could end up paying over 40% in tax on it.
If you sell stocks for a loss, then you can offset any gains you've made plus about $3,000 off your regular income in most cases. Any losses greater than that get carried over to the following year(s).
So if you have stocks that you can offset your gains with, then you have to ask yourself if you want to sell them off or try to wait for them to recover. You also have to wait 30 days after you sell to buy them back (IRS rule involved here).
Most investors don't have a good plan what to do with stock losses and if a company you thought was going up went backwards, is it realistic to believe its coming back. So if you're thinking about unloading these stocks anyway, take the loss and offset your gains.
Its also a really good idea to see how you did investment wise versus the SP500. You might be spinning your wheels when you could have done better off just by investing in the entire market (or a large part of it). |
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Tom H
 |
I agree with some of the others. Often the best option is to keep it simple. Making investment trades just to jigger your taxes, is usually not a good enough reason by itself, unless you are a serious pro.
But here is a tip that hasn't been mentioned. There is an IRS rule called the "wash rule." If you sell a stock (or a portion) at a loss in December then that loss can be used to offset cap. gains in '07, if... If you do not buy the stock back within 30 days.
Maybe you've got a dog that you think is going nowhere (or down) for a while, but might come back at some later date. Sell it now, take the loss on your taxes, then make sure you wait at least 31 days before buying any shares back.
If you buy back in 30 days or less, then the IRS does not consider that a declarable loss. |
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Net Advisor
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This depends on your tax situation. If you have stocks in a losing industry right now (financial), you may consider taking the write off equal to your capital gain. This will leave a neutral tax liability. If you sell more at a loss than your gains, you can write off a bit against your ordinary income (don’t have the exact # - see CPA).
You can carry over looses against your gains. I don't have exact data, not a CPA.
Suggest see a tax advisor before you sell. |
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