For example, you could sell a Standard & Poor’s 500 index fund and buy a total U.S. If you want to generate a loss but don’t want to be out of the market, you could immediately buy a similar, but not substantially identical, investment.
This strategy can be especially useful in California, which taxes capital gains the same as ordinary income at rates up to 13.3%.Ĭaveat: If you sell something at a loss and repurchase the same or a “substantially identical” security within 30 days before or after the sale, you will violate the “wash sale” rule and won’t be able to write off the loss on that year’s tax return. If you still have losses remaining, you can carry them into future years to offset first capital gains and then up to $3,000 in ordinary income, until your losses are exhausted. If your capital losses exceed your capital gains this year, you can deduct up to $3,000 in remaining losses from your ordinary income, such as that from a job or pension. Come tax time, you can deduct these “realized” losses from capital gains you realized when you sold investments at a profit or received capital gains distributions from mutual funds. Tax-loss harvesting: If you have losses on investments in a taxable account, consider selling some to generate a capital loss. If you cash them in before five years you lose three months of interest. You must hold I bonds for at least one year.
Interest is exempt from state and local (but not federal) income tax. Purchases are limited to $10,000 per person per year (in electronic form) and $5,000 (paper form). You can purchase I bonds in a Treasury Direct account or in paper form with a federal tax refund. Every six months after your purchase, the rate on your bond will adjust to the then-current rate. 1 will earn an annual rate of 9.62% for the next six months. On the first business day of May and November each year, the Treasury announces the rate that will apply to I bonds purchased within the next six months.īonds purchased before Nov. Their interest rate is linked to the consumer price index and changes every six months. I bonds: Another option is the Treasury’s inflation-linked I bonds. In some cases, yields on brokered CDs are much higher than what the same banks are offering their own customers. Some brokerage firms are also offering certificates of deposit from FDIC-insured banks (called brokered CDs) with yields rivaling Treasurys. You can’t buy Treasurys for an IRA through Treasury Direct, but many brokerage firms will let you buy them in an IRA or taxable account. “The one- or two-year Treasury has one of the best risk-reward profiles you will see in the marketplace now,” said Chris Wheaton, senior investment adviser with Litman Gregory Wealth Management in Larkspur. Treasurys are backed by Uncle Sam and their interest is exempt from state and local (but not federal) income tax. You can buy them from the government by opening an online Treasury Direct account at and linking it to a bank account. On Thursday, annual yields ranged from 2.8% on a one-month bill to roughly 4% and 4.2% on one- and two-year maturities, respectively. If you can tie up your money for a bit, consider buying shorter-term U.S. These are not FDIC insured but are considered low risk some invest only in U.S. You can also earn upward of 2% on money market mutual funds managed by firms such as Vanguard, Charles Schwab and Fidelity. Many online banks are offering 2% or more in high-yield savings and money market accounts insured by the Federal Deposit Insurance Corp. Thanks to the Fed’s five rate hikes this year, it’s possible to earn 2% to 4% with little effort or risk. Be sure to read up on the details or better yet, consult a legal, tax or financial adviser.īoost your yield: If you still have money sitting in a checking or savings account yielding next to nothing, put that cash to work. Here are some things investors can do now in response to changing conditions that don’t constitute market timing. However, “that doesn’t mean never do anything,” said Roger Young, thought leadership director at T.
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