How should I deal with my long term gain this year?

Question

I have a small long term gain of $1000 this year, and I'm thinking about selling some of my losers to offset it.

I have some long term losses and some short term losses that I could take (and then wait 30 days to buy back those stocks to avoid the wash sale).

I also seem to remember I might have some carry over losses from prior years (but I'd have to check with my tax guy. I'm not even sure how I'd figure this out. I guess I should have been keeping track somewhere).

How much money would I actually save by doing this? (i.e. is it worth the hassle)

Answer 1

Long term capital gains are taxed at 15% this year, so the most you stand to save is $150.

I wouldn't sell anything at a loss just to offset that, unless you planned on selling anyways. A few reasons:

1. The Long term capital gains rate will go up to 20% next year, so your losses will be "worth more" next year than this year.

2. Short term capital gains rates will go up next year as well, so again, better off saving your losses for next year.

3. You must use capital losses to offset capital gains if you have them, but if you don't have any capital gains, you can use capital losses to offset ordinary income (up to a limit - $3,000 a year IIRC). So, if you just bite the bullet and pay the 15% on your gains this year, you could use your losses to offset your (likely higher rate) ordinary income next year.

FYI, complete chart for capital gains tax rates is here.

I also posted another answer about capital gains to this question a while back that might be useful.

Answer 2

I don't believe in letting the tax tail wag the investing dog. You have a stock you no longer wish to hold for whatever reason? Sell it. But to sell a loser, hoping it doesn't rise by the time you wish to re-buy it in 30 days is folly. This effort may gain you $50 if done right. No, it's not worth it either way.