2024 Last-Minute Year-End Tax Strategies for Your Stock Portfolio

2024 Last-Minute Year-End Tax Strategies for Your Stock Portfolio

Introduction

With 2024 coming to a close, investors have a chance to make some last-minute tax planning moves to help reduce their looming tax bills. In this article, we take a deep dive into 7 different capital gains, capital losses, donating appreciated stocks, gifting assets, and more strategies to maximize deductions and minimize taxes on your stock portfolio.

These tips help you use preferential long-term capital gains rates, offset gains with losses, use losses to eliminate ordinary income, avoid losing deductions, and donate or gift appreciated stocks to family or charities in tax-advantaged ways. Keep reading to learn how these seven stock portfolio maneuvers work and when to use them before 2024 is out.

High Tax Rates on Short-Term Gains

Ordinary income tax rates up to 37% plus the 3.8% Net Investment Income Tax applies when you sell stocks you held for one year or less. At the federal level, your short-term capital gains can be taxed over 40%. We want to avoid triggering these high tax rates as much as possible.

Long-term capital gains from assets held for more than one year are taxed at more favorable rates from 0% to 20% depending on income. Long-term gains are taxed at a federal rate of no more than 23.8% with the 3.8% Net Investment Income Tax added on top. You’ll see several of the strategies below do exactly that, converting short-term gains into preferential longer-term gains.

Strategy #1: Offset Gains and Losses

Analyze your portfolio for stocks to sell that offset high-taxed short-term gains with low-taxed long-term losses. This strategy allows you to eliminate high taxes and pocket the difference.

Strategy #2: Utilize Long-Term Losses

Use long-term losses to create a $3,000 deduction against ordinary income. This takes advantage of the lower 23.8% tax rate on long-term losses to offset income taxed at higher rates.

Strategy #3: Avoid the Wash-Sale Rule 

Avoid buying a substantially identical stock within 30 days before or after selling shares for a loss, which triggers the wash-sale rule disallowing the current deduction of the loss. Either wait 30 days before repurchasing or repurchase immediately since there is no wash-sale rule for gains.

Strategy #4: Use Loss Carryovers 

If you have significant loss carryovers, sell additional assets to create offsetting capital gains before year-end. This allows you to use up loss carryovers since these will disappear upon death.

Strategy #5: Gift to Lower-Income Family 

Consider gifting appreciated stock to lower-income family members so they can sell and pay taxes at their lower rates. This results in greater after-tax money kept within the family.

Strategy #6: Donate Appreciated Stock 

Donating appreciated stock is a way to receive the full market value deduction without paying capital gains tax, offering you more benefits than donating cash. Up to 5 years, excess deductions can be carried forward.

Strategy #7: Don't Donate Depreciated Stock 

You should always sell depreciated stock first to take advantage of tax loss deductions, and then donate the proceeds. If you don't do that, you're not able to realize the capital loss for tax purposes.

Conclusion 

These 7 last-minute tax strategies can save you big bucks in tax on your stock portfolio. The trick is to offset high-taxed gains with low-taxed losses, making use of loss carryovers, and gifting or donating appreciated stocks as optimally as possible. If you act now, before December 20, you can put these strategies in place and lower your 2024 tax bill.