Donna Genie explains how to sell appreciated stock now to lock in capital gains at current tax rates, then buy the shares back to reset your cost basis. Unlike loss harvesting, there's no wash-sale rule stopping you from repurchasing, so you can realize gains without losing the position.
You may have heard about harvesting tax losses. That is a strategy where you are selling some stocks at a gain to offset losses that you may have that you might not be able to deduct. Once you have over $3,000 in net loss for stock sales, that amount carries forward as their capital loss carry forward. In this case, we're talking about harvesting gains. Why would you want to do that? Well, if you're concerned about the capital gains rate going away and that may have a large effect on you, you may want to look at the timing and sell the stock and capture the gains right now while you have a lower capital gain rate and you can buy the stock back. You can't sell a stock at loss and buy it right back. That's called a wash sale rule. However, there is no wash gain rule. So if you have a stock that you purchased and you want to sell it now to get the gain to appear this year before any changes happen with capital gains, you can sell that stock, capture the gain, buy it right back, and now you hold it at the higher basis moving forward. This is not something you want to run out and do without talking with your broker first and really understanding the consequences that it may have on your taxes. However, for some folks who might be in a low tax bracket right now where the capital gains rate is actually zero, this might be a strategy. That's time is perfect for you right now. If you have questions about how to harvest gains, I'm here to help. I'm Donna Bordeaux at Calculated Moves. Please be sure to subscribe to our page for more news like this and follow us on Facebook. Sam.
