If I did not make any stock gains this year, should I still sell the losses before the year ends?

Question

I'm negative on my return this year but I still have a few losses in the portfolio. I hear that I should sell them before the new year. Also, what is the typical logic in selling your losses before the year ends.
Thanks!

Answer 1

Mr. Money is almost correct. You are allowed to apply up to $3000 of capital loss AGAINST ORDINARY INCOME. Any additional loss can carry over to following years. And each year that your loss exceeds your capital gains, you can take an additional $3000 against ordinary income for that year.

Answer 2

Typically, the logic of taking capital losses is to offset capital gains, and thereby negating any tax obligation on the gain. Since you have no gains, you will not be able to lower your taxes by claiming a capital loss this year. You will be able to carry forward those losses to offset future gains.
Your best bet is to either sell some stock on which you have an equal amount of gain as your loss, (you can rebuy the stock next week if you like the stock), or delay taking the loss by selling the stock next week.

Answer 3

You can take up to $3,000 per year in capital losses on your taxes. Anything more, you can rollover to next year.

If your investments have not done well this year (while almost everyone is up over 10%, then you really need to rethink your investment strategy. Look into long-term mutual funds. You will have a lot more money in 20 years if your investments are going up (rather than down).