Make the most of investment losses and gains at tax time

   Tax strategy is a large part of any successful investor. When you start to create a portfolio, the last thing you want to think about is losing principle, but it happens to everyone, even Warren Buffett. When you have losses, they can be managed to reduce taxes. Everyone can reduce taxable income by up to $3,000 per year. Any losses over $3,000 can be carried into future tax years. You can also offset gains that would be taxable.  If you've made $5,000 on one investment then selling another that has a $5,000 loss leaves you with no tax liability as they offset each other. By donating stocks that have appreciated in value to charity, you pay no tax on the gain, and the donation is tax deductible as well. My favorite thing to do with a loss in a taxable account is to use the proceeds from the sale to fund my traditional IRA account (IRA contributions must be earned income so deposit the proceeds from the loss in a checking account and use income to fund your IRA). I get to reduce my taxes by the loss on the sale, and I reduce them again with the IRA contribution. I get two deductions out of the loss, hence reducing the blow to my ego, a little anyway. Finwiz.