Deferring Gains and Accelerating Losses

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Deferring Gains and Accelerating Losses

Generally it is preferable to defer gains and accelerate losses for the simple reason that the later the taxes are paid, the longer you have the use of the money. In addition, when you recognize a gain or loss it can also affect the tax benefits of your itemized deductions and exemptions. That's because capital gains and losses are included in figuring your adjusted gross income. Therefore, your capital gains and losses affect the calculation of your itemized deductions and personal exemptions which are phased out after your income reaches a certain level. Miscellaneous itemized deductions are deductible only to the extent that they exceed 2% of your adjusted gross income. Medical expenses are deductible only to the extent that they exceed 7.5% of your adjusted gross income. Capital gains income therefore also has an impact on both of these calculations. Depending on your itemized deductions, the time at which you recognize a capital gain or loss can have a significant impact on your taxes.

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