How You Can Lose Money on Paper And Still Win at Tax Time Like Romney

We’re programmed to hate losses. A loss tends to mean that you did something wrong, made a poor move or chose the ill-advised option. But in the tax world, a loss isn’t always a bad thing. Losses on paper sometimes means a win at tax time – just ask Mitt Romney. Romney’s 2010 federal income tax returns resulted in a fairly low tax burden considering the amount of reportable income; tax professionals were quick to speculate that Romney benefited from a net operating loss (NOL) in a prior year. Most taxpayers associate NOLs with businesses, not individuals. But that would …

9 Tax-Related Myths About Selling Your Home

I am moving. It feels weird to finally say that out loud (er, yes, the blog counts as out loud). I have lived in my current home in Philadelphia for fourteen years: my entire adult life, more or less. In that time, I’ve stored up a whole houseful of memories. I have hosted Thanksgiving dinners in my dining room and cocktail parties on my porch. I brought my children home from the hospital to banners and balloons stretched across my front door. My kids learned to walk in this house and ride their bikes on the sidewalk out front. I …

All You Need to Know About IPOs, Going Public and Stock Options

Admit it. For weeks now, you’ve been dropping the terms “IPO” and “going public” and “stock options” in water cooler conversation and at cocktail parties and you don’t really know what they mean. Or how they make people rich. Or why it matters to you. And it’s totally Facebook’s fault. As you know, Facebook is “going public” any day now and those “stock options” are going to make folks like Mark Zuckerberg and Eduardo Saverin ever more rich. As much as the whole world wants to pretend that we really don’t like those guys and we really hate Facebook (remarkable …

Taxes From A to Z: C Is For Capital Losses

C is for Capital Losses. We hear a lot in the tax world about capital gains. But what about its counterpart, capital losses? You don’t see a lot written about losses because, let’s face it, they’re a bit of a downer. Nobody wants to talking about losing money. It’s much more fun to talk about making money. But there’s not a week doesn’t go by that I don’t receive at least two or three emails asking about capital losses. So, grab your antidepressants… we’re talking capital losses. Capital gains and capital losses are figured on capital assets. And despite how …

A Loss By Any Other Name Isn’t the Same: All About Capital Losses (And Gains)

That horrible crash you heard today? It was the market. And it was not pretty. The Dow fell 630 points today, marking the worst day for investors in three years. As a result, you can’t swing a cat without some kind of market analysis. Except here. Between you and I, I don’t know enough about the subtleties of the market to know who to blame more, so I won’t. And I will cling to my Pollyanna view of life and assume that the market will eventually recover, despite the dark and foreboding warnings from the media. All of that said, …

What the Heck is Basis, Anyway?

Last week, I committed a terrible tax blogging sin: I used jargon. I try not to use jargon on my blog. I find it annoying, for one, because who wants to actually sound like a tax attorney (no offense to my esteemed colleagues). But more importantly, what’s the point of reading a blog that you can’t understand? So, I’m making amends with a quick explanatory post about basis. Here’s the context: there’s a current proposal in Congress to reinstate the federal estate tax with a higher personal exemption and a “stepped up” basis for assets. The proposal also includes an …

Ask the taxgirl: New cars, tax deductions and losses

Taxpayer asks: Earlier this year, I agreed to co-sign on a loan for my adult son for a new car so that he could get to work. He made the first payment and has not made payments since. I have made all of the other payments. I have 2 questions: Since I really bought the car, can I claim the deduction on new cars this year? If I sell the car for less than I paid for it, can I claim a loss? Thanks for your time. Taxgirl says: Okay, I’m going to make a pretty big assumption here. I’m …

Twitter Tax Tips #15

Losses aren’t taxable losses until realized (even if they suck). If no sale or other taxable event, no taxable loss. #TwitterTaxTip (For more on twitter tax tips, see my prior explanatory post.)

Some Straight Talk On Capital Losses

As a result of the recent volatility on the stock market, I’ve received a bunch of questions about claiming losses on individual tax returns. What’s been made clear is that there are a lot of misperceptions floating about… I thought I’d try and set some things straight. To keep it simple, I’m going to focus on capital gains and losses as they apply to stocks – we can talk homes, art and other assets later. First, some quick vocabulary: Basis. Your basis is generally equal to the original cost of the shares. If you participate in a DRIP or other …

Ask the taxgirl: Loss Carry Forward and Divorce

Taxpayer asks: Hi– Was wondering if you could advise on what happens if a married couple has, say, a capital loss carryover, and the couple divorces. Do they just split the carryover down the middle? Can they negotiate the amount each takes? Does the carryover amount change with a filing status change? Taxgirl says: Divorce and tax can be tricky – and I highly recommend that you consult with a family law and tax professional – but here are the general rules: If a married couple files separate returns, the loss follows the taxpayer who first reported the loss. If …