JoeTaxpayer

I’ve remarked that by February/March when many of us are running to our tax man (queue up the Beetles’ song by that title) it’s already too late for certain things it may be wise to do before year end.
Selling stock at a loss may be something to consider. First, if you have any stock gains during the year, losses will offset or completely cancel those gain. If the losses are greater than your gains, up to $3000 may be taken again ordinary income producing a tax savings.
One reason I bring this up today and not mid-December is that you may feel that the stock you hold have good fundamentals and you expect them to rebound, i.e. you wish to hold them for the long term. You are not permitted to sell stock at a loss and buy back the same stock in fewer than 30 days. This is called a wash sale, and the loss is not allowed, it simply reduces the cost basis of the repurchased shares. You are, however, permitted to buy shares, wait 31 days and sell the losing shares (identifying those shares to your broker as the shares you wish to sell) and not run afoul of the wash sale rules.
As always, I warn that you should not let the tax tail wag the investing dog. And you should always know why your portfolio is invested the way it is, whether it be in individual stocks, ETFs, or mutual funds.

Joe

written by JOE \\ tags: cost basis, Investing, irs, mutual funds, stocks, tax

In 2008, the (long term) capital gains rates dropped. If you are in the 10% or 15% marginal bracket, your capital gain rate drops from 5% in 2007 to 0% (yes, zero!) from 2008-2010. For those in the 25% bracket or higher, the rate remains 15%. In 2011, these rates revert back to the pre-2003 levels of 10%/20%. See the charts at Fairmark to understand what bracket you fall into. As always, one should not let the tax tail wag the investing dog, it’s just good to know how these laws impact your investments. If this advice sounds familiar, I first suggested this back in January. Between the growth in readership I’ve enjoyed since then (up fivefold) and the risk this benefit may be short lived, I thought it worth repeating.
JOE

written by JOE \\ tags: capital gains, capital gains rates, Fairmark, Investing, investment, irs, long term capital gains rates, tax

This past Thursday’s New York Times Op-Ed page offered an article by Warren Buffet, titled, “Buy American. I Am.” I like Buffet and enjoy his sound bite wisdom. This article contained quite a mix. Among them:

Be fearful when others are greedy, and be greedy when others are fearful.

In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

“I skate to where the puck is going to be, not to where it has been.” (quoting Wayne Gretzkey, a hockey player)

Of course, only time will tell, but Buffet has had a good track record and a sane approach. I hope his words are prescient.

Joe

written by JOE \\ tags: Finance, Investing, stocks, warren buffet

The Palin’s income for 2007 was revealed to us as being $166,080. During the Vice-Presidential debate this past week, she referred to her and her husband as being ‘middle class’. “$166K middle class”, I asked myself, about to embark on how disconnected all politicians appear to be. Then I asked myself the next logical question, “Where does middle class end and upper class begin?” An entry in Wikipedia offers us that “The American upper class is estimated to constitute less than 1% of the population, while the remaining 99% of the population is ‘Steerage/Under class.’ ” To join the top 1% of households from an income perspective would take about $350K/yr. So by this definition, the Palins are indeed middle class. She does get credit for knowing the precise number of houses she owns.

Joe

written by JOE \\ tags: Finance, income, Investing, palin, president, wikipedia

In a post on April 21, “DVY - The iShares Dow Jones Select Dividend Index” (another of my eye-catching post titles), I offered that this ETF provided a nice dividend, 4.29% when I posted, a bit less after the recent rally. I suggested that for those who are investing for the long term, this ETF might provide a good selection. The dividend is taxed at favorable rates, 0% if you are in the 15% bracket or lower. Below is a chart comparing DVY to the S&P 500 index since I made the recommendation. *

I acknowledge that there was a time, around July 15th when this appeared to be a bad idea, with DVY lagging the S&P by more than 10%. Of course, in hindsight that was the time to buy more, as DVY recovered and since my April post, the DVY is up 2.5% vs the S&P, down nearly 10%.
I’ll repeat, this ETF is a mix of stocks with the risk the market brings, but the long term, a five year period or longer should reward patience.

Joe

*My standard disclaimers apply.

written by JOE \\ tags: DVY, etf, Investing, ishares, S&P, stocks, tax

Last week, the Q2 ‘08 number was revised to 3.3% up from 1.9%. This may be attributed to the stimulus package, or an increase in exports due to the lower dollar, but it’s good news and far from the depression some were forecasting.

Perhaps we’ll avoid a recession altogether, and Q4 ‘07 will be the only quarter of contraction. Time will tell.

Joe

written by JOE \\ tags: Finance, gdp, Investing, investment, recession