Realize losses and gains at convenient time
Suppose I am long-term invested in some stocks or etfs.
Consider the following two situations:
1) stock market is high, my personal income from work is low.
Is it a good idea to sell (part of) my stock, and buy it at (nearly) the same price?
The idea is that the capital gains are realized at a convenient time so only little taxes are paid.
2) stock market is low (below buying price), personal income from work is high. Sell/rebuy (parts of) the stock to realize losses to lower tax burden from work income?
What are the risks?
Is there a way of "realizing" the gains and losses at a convenient time without actually selling/rebuying?
(2)2 Comments
Sorted by latest first Latest Oldest Best
Tax loss harvesting is the selling a security that has experienced a loss in order to offset taxes on both gains and income. The sold security is replaced by a similar one, maintaining asset allocation and expected returns.
In the U.S. we have the Wash Sale rule which prevents us from realizing a loss and replacing it within 30 days before or after with the same security or a substantially identical security such as an option.
By the same token, one can harvest gains in low income years in order to pay a lower amount of taxes on the gain. There is no prohibition in the U.S. against doing this, ala the Wash Sale rule.
I have been doing this for years since my income is very variable.
The short answer is that you should determine the gains or losses on your positions, determine your tax status and then work the numbers to see if harvesting any gains or losses is worthwhile. And make sure to find out if you have any regulations similar to our Wash Sale rule.
Since you're asking for Germany, the answer is specific to Germany of course.
The 1st scenario only pays off if your personal tax rate on income is less than 25 %. In that case, in your tax declaration you have to apply that your personal tax rate is applied to your capital gains.
If your personal tax rate is higher, German flat rate tax of 25 % should always be favoured. Than the timing of realising your gains might only depend on your yearly tax exemption amount of 801 €.
The 2nd scenario is a misjudgement! Capital losses can't be deducted from your labour income. They can only be deducted from other capital gains and even then these need to be "of the same kind". See German Einkommenssteuergesetz for details.
Terms of Use Privacy policy Contact About Cancellation policy © freshhoot.com2025 All Rights reserved.