Isn't it fun legally pulling one over on Uncle Sam? It's one of life's greatest pleasures.
But he makes paying taxes so #%$@& complicated that you're probably missing some very easy (and legal) ways to pay less taxes. And that means you're missing out on all the fun!
Let's visit Financial Zen utopia , where you can invest in fresh fruit. You own a diversified portfolio of apples, oranges, pineapples, grapes and blueberries. A veritable nuclear bomb of anti-oxidants. Good for you! You're gonna live forever!
This year the price of oranges went way up. But the price of apples went way down.
The $100 you invested in oranges is now worth $120 (woohoo!). The $100 you invested in apples is now worth $80 (whomp whomp).
But it's all just paper gains and losses until you sell them.
If you sold the oranges, you would have a $20 realized gain and have to pay Uncle Sam a tax of 15% or about $3.
What happens if you sell the apples? Well then you have a $20 realized loss and Uncle Sam pays YOU $3.
Gotcha! Just seeing if you're paying attention. It totally doesn't work that way! That'd be nice though, wouldn't it?
What would actually happen is you can use the $20 loss in apples to offset the $20 gain in oranges.
Then the net gain for the year is $0 and you wouldn't owe Uncle Sam anything. Take that, Unc!
But what if you sell the apples, but don't sell the oranges? What can you do with that $20 loss?
You can use it to offset gains elsewhere - in grapes or blueberries or pineapples - OR if you don't have any realized gains anywhere then you can use some of it to pay less income taxes.
Even too much fruit isn't good for you. That should be a digestible amount for this week. Next week I'll show you how to stick to Uncle Sam - Every. Single. Year. - regardless of what your apples are worth.
Disclaimer: This blog is for educational purposes only and should not be considered financial, tax or legal advice. These statements have been simplified for illustration purposes. Consult your financial planner or tax advisor for help with your specific situation.