My Investing Notebook :: Learning from the pros; making decisions on my own. ::

The article, A Rich Harvest of Losses, in the latest issue of BusinessWeek (my favorite mag) — Oct 31st, 2005 — contains a lot of good advice on how to maximize your taxes (or how to pay the least amount of it). I’ll take the most important excerpts.

You can gain money from this advice if you have stocks that lost in value since you bought them.

Find losses and squeeze some tax benefits from them. Short term losses are more valuable than long-term losses. Why? They can be used to offset short-term gains on which the tax rate can run as high as 35%, depending on your income.

But what if there are stocks you don’t want to sell?You can sell a company and buy it back 31 days later. But make sure you wait 31 days or you will be hit with a wash-sale rule, erasing your benefits.

There is another way, also explained in the article. If you still don’t want to sell your stocks, you double up on them.

One way to douple up — purchase a company shares equivalent to the number you want to unload — and sell the older, higher priced shares after 31 days. You take a loss on the older shares, but establish a new position at a lower price.

Another way, swap your losers with similar companies, or buy an ETF that has a lot of stock in the company you own.

This is some good information from BusinessWeek. I could have used this info last year, when I had some gains.

ReferenceA Rich Harves of Losses: BusinessWeek, October 21st, 2005