With just two business days left in 2013, it may be time for you to harvest some capital losses. You’re allowed to take $3,000 of capital losses (in excess of capital gains). To be a capital loss, the transaction must be realized–you must sell the security. As long as the stock sale is placed by the 31st (the trade date), it’s a 2013 sale.
Like almost everything in tax, there are some gotchas. The biggest one is wash sales. Let’s say you sell 100 shares of XYZ on December 30th in security account 1 and then buy 200 shares of XYZ on January 15th in security account 2. That’s a wash sale–you’ve purchased substantially the same stock within 30 days of the sale. Let’s say you purchased those 200 shares on December 15th; that’s also a wash sale. It’s within 30 days from the date of sale in either direction. The IRS, in Revenue Ruling 2008-5, believes that if you sell the 100 shares of XYZ and then buy the same shares in an IRA, that’s also a wash sale!
As Joe Kristan noted, the sale must be in a taxable account. Selling stocks in an IRA won’t decrease (or increase) your tax.
So if you have a dog in your portfolio that you’ve been thinking of selling, now may be the time to do so. But don’t wait too long: Most investment advisors will be closing up early on New Year’s Eve.