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Utilizing your Capital Losses now
Capital losses are only deductible up to $3,000 per year. On some investments, the losses are large enough that it may take many years to get full benefit of a loss.
Therefore, you may want to do some capital gains planning to take the benefits now rather than later.
Therefore, if you have substantial losses, consider selling securities at a gain and then immediately repurchasing them, since the 30-day rule does not apply to gains. That way, your gain will be tax-free, your original investment is restored and you have a higher cost basis for your new investment (i.e., any future gain will be lower).
If you have net gains, try to avoid short-term gains which are usually taxed at a much higher tax rate (up to 35%) than long-term gains (15%). You might consider, where feasible, trying to reduce all capital gains and generate short-term capital losses up to $3,000.
The maximum long term capital gains tax rate is currently 15%. This is set to rise to 20% in 2011. This potential change in rate in something to think about in your long term investment planning.
