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Capital losses can pay off at tax time

DJIA five years graphicThe stock market topped 13,000 today for the first time since 2008 before ending the day just under that mark. So naturally, I'm thinking about stock losses.

Seriously, though, even when the overall market does well, it's all too possible to have some individual holdings that stink.

But those poorly performing assets could have some value at tax time.

Today's Daily Tax Tip is a reminder that you can use a capital loss to help erase any taxable capital gains.

Or if you don't have any gains you can use up to $3,000 of the losses to reduce your ordinary income amount.

And if you have more than $3,000 in losses, fire your financial adviser and then carry the excess forward to a future tax year.

Using capital losses to offset capital gains is known as tax harvesting. Most folks tend to wait until the end of the year to see how their portfolio has done the previous 12 months.

But you shouldn't, as the old saying goes, let the tax tail wag the investment dog.

Make the moves that fit your overall investment strategy whenever the time is right.

Just be sure to keep good records and then take advantage of the tax code -- either the lower 15 percent capital gains rate for sales of stock that did well and/or capital losses to offset those gains.

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