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2020 Last-Minute Year-End Tax Strategies for Your Stock Portfolio Part 4

Writer's picture: Shari JamesShari James

Strategy 4

If you have lots of capital losses or capital loss carryovers and the $3,000 allowance is looking extra tiny, sell additional stocks, rental properties, and other assets to create offsetting capital gains.

If you sell stocks to purge the capital losses, you can immediately repurchase the stock after you sell it—there’s no wash-sale “gain” rule.

Important. Don’t die with large capital loss carryovers—they’ll disappear.2

·If your carryover originated from you only, then it all goes away if not used on your joint return in the year of your death.


·If your carryover came from joint assets, then your surviving spouse gets 50 percent of the carryover to use going forward.

Strategy 5

Do you give money to your parents to assist them with their retirement or living expenses? How about children (specifically, children not subject to the kiddie tax)?

If so, consider giving appreciated stock to your parents and your non-kiddie-tax children. Why? If the parents or children are in a lower tax bracket than you are, you get a bigger bang for your buck by

·gifting them stock,

·having them sell the stock, and then

·having them pay taxes on the stock sale at their lower tax rates.

You also get a similar family benefit if your parents or children hold the stock for the dividends and then pay taxes at their lower tax rate.

The 2020 dividend and individual capital gain tax rates are3

1. 0 percent tax on long-term capital gains and dividends when your taxable income is less than $40,000 on a single return ($80,000 on a joint return, $53,600 for head of household);


2. 15 percent tax on long-term capital gains and dividends when your taxable income is greater than what you see above but less than $441,450 on a single return ($496,600 on a joint return, $469,050 for head of household); and


3. 20 percent tax on long-term capital gains and dividends when your taxable income is $441,450 or greater on a single return ($496,600 or more on a joint return, $469,050 for head of household).


 

more to come!

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