"Harvesting losses"

blaha 17 years ago

Greetings experts:

I just listened to a CPA CPE webinar concerning tax planning after the elections. One tip, that I have certainly heard often, was to tell your clients to be sure to harvest enough capital losses in this down market to cover any capital gains. This makes since in general, but wouldn't it be just as prudent to tell people to take enough in losses to cover your capital gains, plus an additional $3000 to cover the limit of ordiniay income offset? If the losses are there, I would think that extra 3k is more valuble than covering the capital gains. Yes?

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Bill 17 years ago

Anybody fortunate enough to have capital gains this year would certainly be wise to consider "harvesting" losses as an offset. And if losses exceed gains by at least $3K, they will have the advantage of that additional sum as a subtraction from ordinary income.

Of course, any excess losses -- which I suspect will be quite common this year (Alas, I'll be having those) -- will, of course, be carried forward for use in future years.

I'm no expert -- but rather a volunteer preparer with AARP TaxAide -- but I wouldn't exactly consider that "extra 3K" as _more_ valuable. It's true that, if your marginal rate is high, it would in fact save a greater amount than the maximum 15% capital gains rate. We'll see what the professional experts have to say.

Bill

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Kurt Ullman 17 years ago

Which, my guess is what may be the point. Since it was tax planning AFTER the elections, I am wondering if the guy wasn't suggesting to harvest the losses with the extra to be carried forward for when the more favorable treatment of capital gains expires and isn't renewed.

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LoTax 17 years ago

If you expect that your capital gains are going to fall into the "zero bracket" for capital gains, is it still smart to be "harvesting losses"?

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