Taxing Matters

This is the point of time when, if you have paper losses on any of your stocks, you should be certain to take those losses before year-end. And the point here is to try to wind up 2005 with at least $3,000 in net capital losses because that is the most that can be deducted against your ordinary income during any calendar year.

If you are fortunate enough to have realized net capital gains of $20,000 for the year so far, and if you are at the 15% tax rate, then you would owe Uncle Sam $3,000 on those gains.

One way to offset that tax however, would be to take at least $23,000 worth of losses by year-end so you would end up with a $3,000 net loss.

Don't worry if you should have more than enough losses in order to get your $3,000 deduction because any excess losses can be carried forward and used to offset future gains.

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