September 6, 2011
Traditional logic is that at the end of the year investors who have realized capital gains during the year typically look to sell losing positions to off-set those gains. This year your thought process needs to be different. If you are in or below the 15% tax bracket (married couples up to $69,000 of taxable income and singles up to $34,500) your long term capital gains included in that amount are taxed at 0%!!
So, think twice about selling a losing position just for the purpose of off-setting gains. Unless you have a sound investment reason to sell the losing position you will be losing the tax benefit of the capital loss. You can't reduce a 0% tax bite! Sit down with your tax professional to approximate where your tax bracket will fall before the end of the year. Many retirees who have mostly investment income and quite a bit of tax-free interest find themselves in a 10% or 15% tax bracket. A little pre-planning before year-end should be on your agenda.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).
IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.