Tax costs for poorly timed stock transactions

Your portfolio took a beating, but you were able to use that to your tax advantage by selling some losers. Now one of your former stocks has turned around and you want it back.Bankrate’s 2010 Tax GuideTax tips and toolsHow do I … ?Filing and refundsReal estate and capital gainsFamily and educationOn the jobInvestments and retirementCharitable givingYour state taxes<< All guide content

Don’t be in too big of a hurry to call your broker. If you repurchase the stock too soon, you’ll violate the wash sale rule. This regulation prohibits a shareholder from selling a holding at a loss, using that loss for a tax break and then turning right around and buying the same or similar stock.

It’s designed to prevent the deduction of what the IRS calls “noneconomic losses.” Essentially, in the eyes of the IRS you never really sold the stock. [Read the full article]

Dear Dr. Don,I am wondering if it’s a good idea to use a portion of your retirement savings to purchase a home. If someone has never owned a home, is about age 60 and has rolled over a 401(k) plan into IRA CDs, would it be a good idea to take about one-fourth of their retirement money and use it for the down payment on a home?

Let’s say the retirement savings are about $150,000. It’s not a lot, but if the person is still working, hey would have a little more time to work and put it toward the home. For a single person, who never was able to own a home, would this be a good idea?– Jan Jump-start

Dear Jan,Just as a convenience to me, rather than making it a hypothetical situation, let’s say that the scenario you describe reflects your situation. If you aren’t yet 59�, raiding the retirement accounts requires a lengthier discussion. So, in your case, I’ll assume that “about age 60” is actually over 60.

There are a lot of things to consider in making this decision. [Read the full article]

Weigh Your OptionsAfter you’ve input your information into the IRA Calculator, you may find that certain IRA types are automatically off limits to you due to your income level. For example, if you’re in one of the higher tax brackets, you’ll find that you can’t contribute to a Roth; your only IRA option is to make a nondeductible contribution to a traditional IRA.

But what if you establish that you’re eligible to make more than one type of IRA contribution– for example, you can contribute to a Roth and make a deductible contribution to a traditional IRA? You may decide to split your contribution between both vehicles, or you could go back to the IRA Calculator for a more definitive answer. Click on the Comparison tab at the top of the calculator, then enter the data you’re asked to provide. (If you’re not sure about your tax rate, refer to the IRS’ website.)

After you’ve entered all of your information, click Submit. [Read the full article]

Massachusetts Gov. Deval Patrick has filed a second pension overhaul package that would raise state retirement ages and cap earnings.

Patrick said the proposal would build on a law he signed last year designed to close loopholes in the pension system.

The new proposal would raise the minimum retirement age for elected officials and most state workers from 55 to 60. The retirement age for firefighters and police would increase from 45 to 50.

The plan would also cap maximum annual pension payments by tying them to a percentage of the federal limit and require Supreme Court Justices, the only state employees who don’t pay into the retirement system, to contribute to their benefits.

Patrick said the changes could save $2 billion over 30 years and would apply to current employees where possible. [Read the full article]

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