Stock Market & Tax Strategies

The wild swings in the stock markets lately have added a degree of volatility not only to investments but also to related tax strategies. Taking inventory of gains and losses at this time to map out a year-end buy, sell or hold strategy later makes particular sense. Investors should note that immediate losses in the stock markets do not necessarily translate into tax losses. The fact that assets purchased several years ago may still yield taxable gains because of low basis, and the existence of the wash-sale rule if a stock is purchased within 30 days before or after a sale, should be considered in assessing current tax positions.
Taxpayers overall should also remember the new, higher tax rate environment that is now in its third year. Not only is the top rate now 39.6 percent for ordinary income (and short-term capital gains) but the rate for long-term capital gains and qualified dividends increased from 15 to 20 percent. Furthermore, a 3.8-percent net investment tax applies to taxpayers with income above a non-inflation-adjusted threshold ($250,000 for married taxpayers filing jointly; $125,000 for married taxpayers filing separately; and $200,000 for all other taxpayers).

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