In December 2010 The Sarasota Herald Tribune published my version of the top 10 Screwiest Tax Provisions.
We have been updating that list here:
Screwy income tax provision – #8
Tax Planning: Deducting Capital Losses
The annual capital-loss limitation is $3,000. This one has been around for a long time and never made any sense. You have to pay tax on all your gains when you sell stock, but only can deduct $3,000 in any single year when you sell at a loss.
If you have a large carry forward capital loss which you are having trouble using there are things you can do before December 31.
- If you have an impending sale of real property which will result in a significant capital gain to you see what can be done to move up the closing date to 2014.
- If you are holding various publicly traded securities which have significant unrealized gains consider selling them. Then re-purchase the same stock after 30 days. That way you can net the capital gain against your current accumulated capital losses and thus reduce your tax burden. Also you may l avoid a huge tax in the future when you do permanently dispose of the subject securities.
- Consider shifting your dividend generating portfolio to stocks which generate capital gain dividends.
Warning: Do not make any decisions as noted above without conferring with your tax specialist and/or your investment advisor. Your particular situation may not exactly fit these simple examples.