Collecting tax losses is a strategy that investors can use to reduce the total amount of capital gains taxes owed on the sale of profitable investments.
The strategy involves the sale of an asset or security with a net loss.
The investor can then use the proceeds to purchase a similar asset or security, maintaining the overall balance of the portfolio.
The investor must be careful not to violate the IRS rule against buying a “virtually identical” investment within 30 days.
The American Opportunity Tax Credit (AOTC) helps offset the cost of post-secondary education for students or their parents (if the student is a dependent).
Deductible taxes are expenses that a taxpayer or business can deduct from their adjusted gross income, which reduces their income, thereby reducing the total tax they must pay.
The Earned Income Tax Credit (EITC) is a refundable tax credit used to supplement the wages of low-income workers and help offset the impact of Social Security taxes.
As a result of the Tax Cuts and Jobs Act (TCJA), most taxpayers can now only carry forward net operating losses (NOLs) that occur in tax years after 2017 to a later year.
Form 4684 is the U.S. Internal Revenue Service (IRS) form for reporting profits or losses from accidents and thefts that occur as a result of a federally declared natural disaster that may be deductible for taxpayers who detail deductions.