It doesn’t matter how much stock market advice you get, there’s bound to be times when you’ll lose a few trades here and there…
For most people, that’s money they’ll never see again, but there’s a simple way to collect that money back.
It’s almost as if the taxman is giving you a second chance to try again. Here’s how…
Tax Day is creeping up quickly and that means the taxman will be knocking on your door before you know it.
For most of us, this time of the year brings misery in knowing we have to fork over some very hard-earned cash… but I want to show you how I stuff thousands of that cash back in my pocket.
It’s all thanks to a loophole in the capital gains tax system.
Let’s face it… we all lose money to the stock market from time to time—myself included…
We use very special tricks to combat this (like stop losses, etc.), which help us end the year cash positive, but it’s still nice to take some of those losses back and snatch a second chance.
That’s where this capital gains tax trick comes in.
Before we talk about your losses, let’s just cover what taxes you should be paying on your capital gains… because we all know what happens if we don’t give the greedy taxman what he asks for.
Capital gains (any gains you’ve made on investments) are taxed in two ways: long-term and short-term.
Long-term capital gains tax applies to any stock or investment you’ve held for a year or more.
If you fall into the 25-, 28-, 33-, or 35-percent income tax bracket, your long-term capital gains tax is 15%.
If you’re in the 10- or 15-percent tax bracket, you pay zero capital gains tax; and if you’re in the 39.6 percent tax bracket, you pay 20%.
Short-term capital gains tax applies to any stock or investment you’ve held for less than a year.
These gains are taxed with your regular income.
So, let’s say, for convenience sake, you’ve had a rough year and have netted a short-term capital loss of $3,000…
Most people would be pretty annoyed about that and would start asking themselves questions as to why they’ve lost so much.
The people who understand this simple tax trick won’t be too bothered by it…
Because the trick allows you to claim that $3,000 back by using it against your income to knock up to $3,000 off.
If you’re already using this trick, I salute you for not overpaying the greedy taxman… if you’ve never heard about this trick before, I suggest you figure out your capital gain/loss before the year’s over and prepare to take that money back.
As always, consult with your tax advisor about Capital gains/losses to find the best way to put this money back in your pocket.
