Before year-end, take capital losses now for tax savings you can claim on your 2003 return and perhaps in future years. Up to $3,000 worth of net capital losses may be deducted each year. Excess losses may be carried forward indefinitely.
Thus, you should make sure you have at least $3,000 worth of net losses this year. Suppose you tally your trades near year-end and discover you have $5,000 worth of net gains so far, in 2003. You should take at least $8,000 worth of losses by year-end. With net capital losses of $3,000, you’ll be entitled to a $3,000 deduction on your 2003 tax return, instead of owing tax on a $5,000 gain.
On the other hand, suppose you have $10,000 worth of net capital losses so far this year. You can take $7,000 worth of gains, even short-term gains. The gains will be tax-free and you’ll still have a deductible $3,000 net capital loss.
