What Should U.S. Tax-Resident Investors Do at Year-End?

【What Should U.S. Tax-Resident Investors Do at Year-End?】

CLEC Investment Club / Written date: Dec. 20, 2018

Review the capital gains and losses from the past year.

Go into your taxable investment account and see whether your realized capital gains this year are profits or losses.

If your capital gains this year are profitable, you should check whether the stocks currently held in your taxable account include any losing positions. If there are losing positions, you should sell them to realize the losses and offset profitable capital gains, reducing your tax burden.

If you sell some losing stocks and realize losses, you should hold part of your position in cash: at least one to two years of living expenses. If you still have idle money, you can buy different indexes to avoid a wash sale. A wash sale means selling a losing stock and then buying the same stock again within thirty days. If that happens, the loss will not be counted; you must wait until the newly purchased position is sold before gains and losses are calculated.

Do not forget: after capital gains and losses offset each other, if long-term capital gains plus other income total less than 50,000 for a single filer or less than 100,000 for a couple, the long-term capital gains portion can be tax-free.