Should I Sell Anything in December To Help With My Taxes?
Written by
Heather Taylor
Edited by
Molly Sullivan
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As the year comes to a close, many taxpayers may start thinking ahead to filing taxes in 2023. One potential area where there could be an opportunity to save on your tax bill involves selling items.
If this is the case, which items should you sell and how much could you save? Mark Steber, chief tax information officer at Jackson Hewitt, joins GOBankingRates to share whether there’s anything you can sell in December to lower your taxable income. Plus, Steber shares his recommendations for additional money moves taxpayers should consider making before Dec. 31.
Can I Sell Anything To Offset My Taxes?
Admittedly, Steber said there aren’t many regular items you can sell. The general rule is if you earn income, it is considered taxable income. This is true of those who sell goods or services.
But there is an exception to this rule. You may consider selling capital assets you hold that generate a loss for you.
Capital assets, Steber said, include stocks, bonds and virtual currencies. Those who hold onto some of these assets that are underwater or have a built-in loss likely paid more for it than they can sell it for.
Steber recommends selling now to help lower taxable income. “While you may be hoping the asset will turn around, or the value might come back, that might not be true.”
Benefits of Selling Capital Assets
Those who consider selling some of these loss assets could potentially receive two benefits that help with taxes.
The first benefit, Steber said, is any losses can offset similar types of gains made during the year. A long-term loss can offset a long-term gain for those assets held for more than one year. If the asset was held for a year or less, a short-term loss can offset similar short-term gains.
The second benefit is any unused losses can be used to partially offset regular income. This includes income from wages, dividends or most any other income. However, Steber said you can only use $3,000 of losses any year to offset regular income.
While this may seem like bad news, there is good news. Steber said you carry forward any unused losses forever and either offset against the gains in the future or use up to $3,000 each year until all has been used.
“Losses have great value – do not let them just sit there while waiting if they will flip to gains,” Steber recommends, adding it’s best for taxpayers to talk about their unique situation with their tax professional first.
Additional To-Do Tax Items for December
Before Dec. 31, taxpayers may consider taking care of the following items to make for a smoother, and potentially less expensive, tax filing season.
Make an Extra Contribution to Retirement and 401(k) Plans
Doing this can reduce your taxable income and provide an asset for the future, Steber said. “This is an even better option if you have not met your company match: what your employer offers to put into your account.”
Group Deductions
Those who have deductions may consider grouping them. Steber uses the example of grouping medical expenses if you itemize or education expenses if you qualify for education credits.
Make a Business Purchase
This is a helpful consideration for taxpayers with a self-employment income. Steber recommends considering making a business purchase, like an asset purchase or paying some bills in advance, for next year before Dec. 31, 2022.
Consider Taking an IRA to Charity Election
“If you are over 70 ½, make charitable contributions and have a retirement account, consider taking an IRA to charity election,” Steber said. “This can meet your annual required minimum distribution, and you don’t have to itemize to enjoy a charitable benefit.”
Bonus for IRA Account Holders
If you have an IRA retirement account, there’s a bonus in store for you. Steber said these account holders can make contributions until April 17, 2023. “This will still reduce 2022 taxes and give you a valuable retirement asset.”
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