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.