Four Strategies for Reducing Capital Gains Taxes on Investments

As we near the end of our tax year, AAII has offered us some advice for the holidays for reducing the taxes on our investments. Hope you all find something useful in there.  Enjoy the weekend.  

Thursday, December 7, 2023

AAII Update:   Four Strategies for Reducing Capital Gains Taxes on Investments

As we approach the end of 2023, some of you may be looking at a combination of gains and losses in your portfolios. While the S&P 500 index has enjoyed a good year thanks to the returns of the so-called Magnificent Seven stocks, many other stocks haven't seen their prices rise. (The S&P High Yield Dividend Aristocrats index was down year to date at the end of November, for instance.)

If you are among those who have gains and losses from investments held in your taxable accounts, you still have time to reduce your 2023 tax bill. Here are four strategies for doing so: 1. Offset gains with losses. The tax code allows you to offset gains realized in a calendar year with losses realized the same year. Long-term losses offset long-term capital gains first. Short-term capital losses offset short-term capital gains first. If you have excess short-term (long-term) capital losses, they can then be applied to long-term (short-term) capital gains. Any net excess capital losses exceeding $3,000 can be carried over to future years. (You can also apply net excess losses from prior years to this year, so long as you don’t exceed the $3,000 limit.)

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