Harvest those tax losses. Just as millions of disappointed gift recipients rush the retailers to improve on Santa today, investors can get busy over the next few days trying to make the best of their own disappointments. They can cash out losses on disappointing investments to shelter their 2013 gains. Some tips to make sure you do it right:
– You have to take the loss in a taxable account. A loss in an IRA or 401(k) plan doesn’t help you.
– Normally the “trade date” is the effective date for tax purposes, so you can sell a stock as late as December 31 this year and still deduct the loss on your 2009 1040.
– If you have a loss on a short sale, the tax law treats it as closing on the settlement date, not the trade date, so you can’t wait to the last minute to close a short sale to get a deduction.
– You don’t need to overdo it. You can deduct your capital losses only to the extent of your capital gains, plus $3000. But if you do overdo it, individual capital losses carry forward indefinitely.
– Harvesting losses helps taxpayers subject to the Obamacare/ACA Net Investment Income Tax to the extent it helps for regular taxes.
– Watch out for the wash sale rules. If you buy the same stock within the 30 days preceding or following the sale of a loss stock, your loss is disallowed. This is true even if you sell from a taxable account and buy in an IRA, according to the IRS.
Come back tomorrow for another 2013 year-end tax tip!
Paul Neiffer offers Some Quick Year-End Tax Tips
Give away money and folks will line up. “State tax credit program hits a big bump: It’s out of money, and that’s a good sign,” reports the Des Moines Business Record:
Economic development officials in Des Moines and other Iowa cities have been told to stop sending requests for a state economic development tax credit. The reason: The fund is tapped out.
Greater Des Moines developers were told during a meeting last week with officials from the Iowa Economic Development Authority and the city of Des Moines that a tax credit program used to provide gap financing for multimillion-dollar developments has reached its $3 million annual cap on the ability to transfer the credits, a key element in financing the projects.
“Transferable” tax credits are actually subsidies. It is economically identical to giving the developers a license to factor the state’s receivables at a small discount.
Local developers, the Greater Des Moines Partnership, and state officials will press the Iowa Legislature to at least raise the $3 million cap and make adjustments that could eliminate the ranking system.
So people who want the state to give them more of our money and the state officials that give away our money want the legislature to make it easier to give away our money. What could go wrong?
Speaking of the people giving away our money, State-owned Honey Creek Resort near Moravia continues to struggle financially. (thegazette.com, via Gongol) What madness led the government to open a resort? Maybe the same madness that makes people think the government should be allocating investment capital.
Joseph Henchman, Tax Foundation Wins State Tax Notes Honor, Third Year Running:
For three years running now, we have been honored as most influential in state tax policy by State Tax Notes (subscription req’d). This year, they present it as an unranked list of ten recipients. The list is five state officials, three lawyers, one legislator, and us…
Given the response of the Iowa legislature to my suggestions, I am sure that I rank among the ten least influential in state tax policy. I wonder if there’s a prize for that?
Howard Gleckman, TheTaxVox 2013 Lump of Coal Award: Wait ‘Til Next Year Edition. He doesn’t think the Tea Party scandal was more than “merely bungling the job on a bipartisan basis.” Given the overwhelming attention paid to the right, that’s an unsupported statement. Mr. Gleckman is a man of the center-left; when it’s your opponents being targeted, it’s easier to conclude that it’s all fair.
Tony Nitti, Tax Geek Tuesday: When Structuring The Sale Of Your Business Goes Wrong Tony addresses the related-party debacle of Fish v. Commissioner, where a Kansas City taxpayer generated $9 million in ordinary income when he thought he was going to have capital gains, because a partial cash-out of his business worked out to be a sale of goodwill to a related party.
Margaret Van Houten, Do My Estate Planning Documents Need to Have Special Language to Deal with My Digital Assets? (Davis Brown Tax Law Blog)
Russ Fox, Nominations Due for 2013 Tax Offender of the Year. Sadly, Russ will have plenty of worthy candidates.
Peter Reilly offers Kind Christmas Wishes To Those Behind Bars And The Tax Collectors Too “So when you think about it, you realize that one of the reasons that Jesus was born in Bethlehem was that Joseph and Mary were tax compliant.”
Kay Bell, The Christmas tax story
Jason Dinesen, Greatest Hits: Deducting Mileage from a Home Office
TaxProf, World Giving Index 2013: U.S. Is #1
Me, What’s new in year-end tax planning, my new post at IowaBiz.com, the Des Moines Business Record’s Business Professionals’ Blog.
Career Corner. How to Choose Between Two Big 4 Offers When You Have No Clue What Either Involves (Going Concern)
TaxGrrrl, The True Cost Of Christmas: Santa’s Tax Bill:
Compensation is taxed to the elves as income – but Santa has taxes to pay on their behalf. Payroll taxes – at the employer contribution rate of 7.65% – for the elves work out to $1,890,927.
Santa doesn’t pay income taxes on compensation paid to the elves but he does have to manage their withholding according to any forms W-4 provided to him. Fortunately for Santa, there is no withholding requirement for state taxes in Alaska.
I would argue the residency issue. Technically, the North Pole is in the middle of the ocean, and I don’t believe there are territorial claims though. Of course, with his fearsome legendary powers of retaliation, no IRS agent wanting to be on the “nice” list would mess with him.
Tags: economic development, corporate welfare, TaxProf, Kay Bell, Russ Fox, Paul Neiffer, Going Concern, Joseph Henchman, Howard Gleckman, Brian Gongol, Peter Reilly, Anthony Nitti, Net Investment Income Tax, 2013 year-end tax tips