Question for the stock guys

[Sly]

I have a particular stock fund that I would like to sell off. I bought in about a year ago, it's lost some value and I just want out. I want to cash out, I don't want to flip it into other stocks.

I have never cashed out before so not sure what the procedure is regarding taxes.

I lost money so I clearly want to avoid any taxes that there may be on the "income." How exactly does this work? Do I get to write off any losses? Can I just pull the money out and show proof that it was a loss at tax time?

Thanks in advance!

[Idigmygirls]

I'm not an accountant, so don't rely on any tax advice I give you here; however:

What it cost you to invest is your "basis" in the fund. When you sold it, whatever you recovered minus your basis is your "Capital Gain." If your Capital Gain is negative, then you have capital losses.

Capital losses cannot be written off against ordinary income, but it can be used to offset any capital gains you have (or will have in the future), so long as it is "carried forward" on each year's tax return when you file it.

[OneHungLo]

It's 15% if you are in a 25% or higher tax bracket and only 5% if you are in the 15% or lower tax bracket. Profits from stocks held for less than a year are taxed at your ordinary income tax rate. Ordinary dividends earned on your stock holdings are taxed at regular income tax rates, not at capital gains rates.

If you put a $100 into an index find and pulled it out a year later and there was no profit or there was a loss, you'd have no tax liability. Now if you have a stock that had a profit and you sold it, you could apply that loss from the index fund and lessen the tax liability.

You put $100 in an index fund A and sold it a year later for $90. = 10 dollar loss.
You put $100 in an index fund B and sold it a year later for $110. = 10 dollar gain.

Your tax liability would be zero.

[Sly]

That is very interesting, had no idea.

So my losses on this can balance out taxes on business income.

Thanks for the tips guys. I'll go ahead and cash out and let my accountant know the details.

[OneHungLo]

Originally Posted by Idigmygirls

Capital losses cannot be written off against ordinary income, but it can be used to offset any capital gains you have (or will have in the future), so long as it is "carried forward" on each year's tax return when you file it.

You can up to a certain amount. "If you don’t have capital gains to offset the capital loss, you can use a capital loss as an offset to ordinary income, up to $3,000 per year."