Tax Strategies for Short Term gains

[georgeplaten]

I have been playing a small portion of my portfolio and accumulated a large short term gain this year. Any thoughts on how to deal with taxes on short term gains? Obviously, I can pay them and have no problem with that, but I want to take any obvious steps that would provide some tax mitigation.

 

[karluk]

Obviously your options are quite limited with less than a month left in the year. In general, you would want to reduce your taxable income in a year that has an unusually large amount of short term gains. If you have any investments with unrealized losses, you should sell and realize the loss before the end of the year. If you are still working and expect a year end bonus, you should inquire as to whether your company is willing to defer the bonus until January. Consider taking some of the charitable contributions that you are planning on making next year and making them this year instead. The charity gets the same amount of money, but if you itemize you'll get the deduction when it does you the most good. Pay your property tax bill before the end of December to make sure you get that deduction. Pay January's mortgage payment before the end of the year in order to bump up your mortgage interest deduction. If you are eligible to contribute to a tax deductible IRA, max out your contributions.

 

[2B]

The only effective way to reduce short term gains is to realize capital losses.

If you don't have any, you could always try to execute out a bunch of loser trades between now and the end of December. I wouldn't recommend it.

 

[Sunset]

Obviously your options are quite limited with less than a month left in the year. In general, you would want to reduce your taxable income in a year that has an unusually large amount of short term gains. If you have any investments with unrealized losses, you should sell and realize the loss before the end of the year. If you are still working and expect a year end bonus, you should inquire as to whether your company is willing to defer the bonus until January. Consider taking some of the charitable contributions that you are planning on making next year and making them this year instead. The charity gets the same amount of money, but if you itemize you'll get the deduction when it does you the most good. Pay your property tax bill before the end of December to make sure you get that deduction. Pay January's mortgage payment before the end of the year in order to bump up your mortgage interest deduction. If you are eligible to contribute to a tax deductible IRA, max out your contributions.

Fantastic advice.

Will only add for clarity the incredibly obvious max your 401K contribution.
If you earn any money via your own business you still have time to open a vanguard solo 401K, to contribute max personal + 25% of business (gross - direct expenses).

 

[pb4uski]

I have been playing a small portion of my portfolio and accumulated a large short term gain this year. Any thoughts on how to deal with taxes on short term gains?

Unless a decline in value seems imminent, you could just wait it out until you have held for a year. Unless you have offsetting unrealized losses available, you just pay the tax man.