Tax Lawyer Blog

A Blog written by the Tax Attorneys for Individuals and Businesses

Utilizing Losses from your Stock Portfolio

Currently, the Internal Revenue Service taxes gains on stock investments held for one year or less at short term capital gains rates. These gains are taxed at ordinary income tax rates. However, for investments held more than one year, the gains on stocks are taxed at long-term capital gains rates. Currently, long-term rates are taxed at 15 percent (5 percent for taxpayers in the 10 or 15 percent tax bracket). Although these rates are considerably lower the ordinary federal income tax rates, long-term capital gains rates may still generate a sizable federal tax liability.

In order to minimize capital investment tax liability, taxpayers should consider taking advantage of any losses in their portfolio. Taxpayers are able to recognize losses up to $3,000 against ordinary income. In addition, taxpayers are permitted to offset capital gains and losses in excess of $3,000. If taxpayers are holding stocks with losses in their portfolio, they should consider taking advantage of this rule by liquidating these stocks. If a taxpayer still wants to own a stock with a loss, he or she can sell the share and recognize the tax loss, and then re-purchase the stock. However, the taxpayer must be sure to avoid the wash sale rules. These rules state a taxpayer must repurchase the shares at least 31 days before or after he or she sold the original shares recognized for tax purposes. 

American Recovery and Reinvestment Act of 2009

What you can do right now for your bottom line. 
The Stimulus Bill, a.k.a., The American Recovery and Reinvestment Act of 2009 provides for many practical and valuable tax incentives which will really benefit individuals and businesses. Everyone should consult with a tax advisor, as this is not “a walk in the park.” Knowing how to take advantage requires understanding of qualifications and your circumstances. We call this “intelligent tax planning.”

At our law firm we practice aggressive tax negotiations and “intelligent tax planning” and want to take every deduction and credit where legally applicable to our clients. We watch out for phase-outs and qualifications for tax deductions and credits, business goals, and your bottom line.

Some highlights of this Stimulus Bill:

Depreciation:

A bonus for small business. Section 179 Deduction: now allows a taxpayer to expense up to $250,000 of qualifying property, with a phase out of qualifying property valued above $800,00. This is almost double the prior expense allowance.

Bonus Depreciation & Carry Back Losses:

Need some cash? Need some new equipment for your business? There is now a 50% first year bonus depreciation for qualified property placed in service in 2008 and extending to 2009. Businesses consider using this increase in depreciation and to take advantage of net operating loss carry backs for small businesses.

Special Depreciation and Sales Tax Deduction:

Need some new wheels? Purchase a qualified new motor vehicle, motorcycle, or motor home and starting on February 19, 2009, both itemizers and non-itemizers are allowed a deduction for sales and excise taxes incurred on the purchase.

The bottom line: to flourish in this economy stay ahead of taxes.