7 Tax Strategies to Maximize Your Stock Portfolio in 2024

When it comes to your stock portfolio, the tax code offers opportunities to minimize your 2024 income taxes while maximizing your financial benefits. Understanding and applying these last-minute strategies can turn your portfolio into a tax-saving tool. Here’s how to make the most of it:

1. Offset High Taxes with Low-Taxed Losses

Evaluate your portfolio for stocks to sell and use long-term losses to offset short-term gains. For instance, a 23.8% loss can eliminate taxes on gains taxed as high as 40.8%, effectively pocketing the difference.

2. Maximize the $3,000 Ordinary Income Deduction

The IRS allows up to $3,000 of long-term losses to offset ordinary income annually. Use this strategy to convert a 23.8% or even 0% loss into a shield against ordinary income taxed at higher rates.

3. Avoid the Wash-Sale Loss Rule

To ensure losses count in 2024, steer clear of repurchasing substantially identical securities within 30 days of the sale. This simple rule can prevent missed opportunities to deduct losses.

4. Purge Excess Losses with Gains

If capital loss carryovers exceed the annual $3,000 limit, consider selling assets like rental properties or additional stocks to create offsetting gains. Unlike losses, gains aren’t restricted by wash-sale rules. They allow for immediate repurchase of stocks.

5. Gift Appreciated Stocks to Family

If helping family financially, consider gifting appreciated stocks instead of cash. This allows parents or children in lower tax brackets to sell the stock and pay less in taxes, maximizing your financial support’s impact.

6. Donate Appreciated Stocks to Charity

Donating appreciated stocks to a 501(c)(3) charity can deliver dual benefits. You deduct the fair market value and avoid capital gains taxes on profits. For example, donating a $1,000 stock now worth $11,000 yields an $11,000 deduction without incurring taxes on the $10,000 profit.

7. Avoid Donating Loss Stocks

Selling a stock at a loss lets you claim a tax deduction. Donating that same stock forfeits this deduction, making it less advantageous for your taxes.

The Bottom Line

Strategic tax planning and wise last-minute moves with your stock portfolio can make a significant difference in your 2024 tax bill. For help with all your year-end tax planning and wealth management needs, contact Illumination Wealth today.