Why I Sold My Stocks

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The reason I’m selling is because of a term called “Tax Loss Harvesting.” 

This is a tax reduction strategy that allows you to SELL non-performing stocks that have LOST money, to then OFFSET the tax you would owe on the stocks that MADE you money.

Let’s say you bought 2 stocks on January 1st, one of them is NOW UP $10,000 in profit and the other one LOST $10,000 in value. ORDINARILY, if you were to sell that first stock for a $10,000 profit – you would have to pay taxes on that profit, which could be anywhere from 10-50%, depending on your tax bracket. BUT…according to the IRS, you can OFFSET that profit by selling ANOTHER stock at a loss….and if you structure it correctly, that loss would ENTIRELY wipe out the tax you would pay on that gain. 

IN ADDITION TO THAT, if your capital losses exceed your total profit, that remaining amount can be deducted off your earned income, up to $3000 per year, and any amount ABOVE that can be carried forward into future years.

HOWEVER, a few points you must know:

-WASH SALE
This is when you sell a stock for a loss, use that loss to offset your tax, and then IMMEDIATELY go in and buy the exact same stock YOU JUST SOLD within a 30-days window.

-TYPE OF GAIN
If you have a SHORT TERM LOSS On a stock you held for less than a year…that “tax deduction” will FIRST be applied to all the PROFITS you made from stocks you held for less than a year….and then, anything remaining will offset your LONG TERM CAPITAL GAINS. 

-CANNOT OFFSET DIVIDENDS
This is treated differently, so losses won’t offset this income.

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