Nagle's Notes: 12/6/2024

​Greetings fellow Abiquiuers. Merry Christmas and Happy Hanukkah. Or whatever you’re celebrating. In addition to those seasons, this is what I call “Pre-Tax Time”. It’s a time you should be looking at your investments to try to balance out gains with losses before 12/31/24. 
 
Why? The Markets have been great this year, again, and you probably have some nice gains in your portfolio. But nothing’s perfect and you may have some losses too. If so it’s time to take some of those losses to offset the gains. 
 
Let’s define terms here. There are long term (greater than one year) gains/losses and short term (less than a year). The difference is solely in tax treatment. Long term gains are taxed at a lower rate, 0-20% maximum.
 
Another term is “realized” vs “unrealized” gains and losses. You “realize” a gain/loss when you sell an investment. It’s “unrealized” if you haven’t sold it yet. We’re only talking about REALIZED gains/losses here. Unrealized are not taxed yet. 
 
Another factor is where the investments are. If they are in a “qualified” investment like an IRA, or 401K, or TSA, or any kind of pension or profit sharing plan, those gains and losses are not eligible for taking gains and losses in the way I am speaking of here. Gains and losses in those plans simply stay there until you take a withdrawal, then it’s taxed like “ordinary income”. 
 
So what do we do? In your “Non-Qualified” (joint or individual or trust) accounts, look at your gains and losses and, after seeking tax advice from your professional if you have one, you can take losses - that is, sell those investments - up to the gains you have “realized” so far this year. This makes the gains tax free. 
 
In fact, you can take losses up to $3,000 greater than your offset losses and use that $3,000, if you itemize, as a deduction against other income. Nice deal. 
 
I’d review this with your CPA or tax-preparer to make sure other factors are not at play. But it’s an annual exercise you should engage in if you want to minimize your taxes. 
 
Have a very Merry Christmas!
Peter J Nagle
Income Specialist
Thoughtful Income Advisory
Abiquiu, NM 87510-1321
505-423-5378
Email [email protected]