Tax Tips: Investors: Have Your Cake and Eat It Too

A good tax-planning technique is to sell a poor-performing security to “harvest” the loss and offset it against your capital gains. But what if you have high hopes for the security and would like to keep it in your portfolio? One strategy is to sell it at a loss and then buy it back at roughly the same price.

Just be sure to mind the “wash sale rule,” which prohibits you from taking a loss on a security if you buy a substantially identical security within 30 days before or after you sell the original security. The simplest way to comply is to sell the security, wait 31 days and repurchase the same security — provided you’re willing to assume the risk that the price will go up during that time.

One way to hedge your bets is to double your holdings of the security, wait 31 days and then sell the original securities. Or you can sell the securities and immediately buy securities that are similar but not substantially identical.

If you violate the wash sale rule, you won’t lose the loss permanently. You’ll just have to wait until you sell the replacement security before you can recognize it.

ABLE plan can assist disabled family members

If a family member is disabled, check with your home state to see if it will offer an ABLE (“achieving a better life experience”) plan. Created by last year’s tax extenders legislation, the ABLE plan is modeled after the Section 529 college savings plan. Added to the tax code as Sec. 529A, the ABLE plan allows qualifying disabled individuals to set aside funds (up to $100,000 or more) for certain expenses — including housing, transportation, health care and education — without affecting their eligibility for federal and state government aid. Distributions used for qualifying expenses are tax-free.

Are you eligible for the Small Business Health Care Tax Credit?

This refundable, two-year credit — up to 50% of premiums (35% for nonprofits) — is available to employers that 1) have fewer than 25 full-time-equivalent employees (FTEs); 2) pay average annual wages of less than $51,600 (for 2015); and 3) pay a uniform percentage for all employees of at least 50% of premium costs. To qualify for the credit, an employer must purchase coverage through an exchange that’s part of the Small Business Health Options Program (SHOP) Marketplace.

Note: The full credit is available to employers with 10 or fewer FTEs and average annual wages of $25,800 or less (for 2015). The credit begins to phase out once those thresholds are reached.

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