2008 Income Taxes - Use Cap Loss

[chinaco]

For the most part, I am holding my investment positions in the stock market (except for rebalancing).

I am intending to sell enough losers to take the cap loss against my personal income tax for this year (it is good for a small amount).

Early next year I might do the same for 2009.

Anyone familiar with the wash rule? Does it apply if I sell securities in a taxable account and buy them in a tax sheltered account?

[OAG]

C: this may help: The Wash Sale Rule

[kaneohe]

Quote:

Originally Posted by chinaco For the most part, I am holding my investment positions in the stock market (except for rebalancing). I am intending to sell enough losers to take the cap loss against my personal income tax for this year (it is good for a small amount). Early next year I might do the same for 2009. Anyone familiar with the wash rule? Does it apply if I sell securities in a taxable account and buy them in a tax sheltered account?

I have seen some discussion on bogleheads.org that the wash does apply between taxable/tax-sheltered accounts and that you also need to watch out if you have auto-reinvesting in the tax-sheltered account esp if it is monthly (fix is to reinvest in something else for a while).

Whether selling for a tax loss is useful to you can be a very individual thing if you would have had a net capital gain in the absence of the tax loss.
If you would have been in the 15% bracket w/o the tax loss, your capital gains would have been 0. Taking an additional tax loss would have gained you nothing until you exceeded those capital gains. Of course, if you don't harvest the losses now, they might disappear. Sometimes hard to know what the best strategy is.

Might be useful to use a tax calculator to model the strategies w/ and w/o
the tax loss. dinkytown.com and hrblock.com have one. dinkytown is 2008 est. but block was 2007 last time I looked.

[chinaco]

If I can keep a few hundred bucks of my tax $ that might otherwise go to bailout companies... I might as well do it.

[Nords]

Quote:

Originally Posted by chinaco If I can keep a few hundred bucks of my tax $ that might otherwise go to bailout companies... I might as well do it.

We just wiped out an entire (rebalancing) year of cap gains. And probably most of next year's too.

Next year's refund of our estimated taxes is going to be the Nords family financial economic stimulus program...