2019 US tax year end planning: Utilising unused 2019 allowances or deferring income to 2020

Last updated: 13 November 2019

Spreading income over two tax years

Depending on the individual's tax brackets, the tax rates on long term capital gains and qualified dividends ranges from 0% - 20%. The tax rates on ordinary income range from 0%-37%.

Individuals can deduct net capital losses against income up to $3,000, with any excess capital loss carried forward. Should you wish to reinvest in the same stock, either it is best to do so 30 days before or 30 days after the sale to avoid wash sale rules, which would disallow the loss.

What should you do?

By spreading capital gains/income between tax years, you can abstain from incurring spikes in income, which may push gains/income into the higher tax brackets. This may help minimise the total tax paid for those tax years. Individuals may also want to consider realising some capital losses to reduce tax on other investment income and gains. You should always consider the US and UK tax impact of your tax and investment planning.

Net Investment Income Tax (NIIT) 

You may continue to incur an additional tax of 3.8% on unearned investment income, where your modified adjusted gross income exceeds the following thresholds:

What should you do?

By spreading investment income across a number of years, or offsetting it by above the line deductions, you can prevent the requirement of paying the additional 3.8% NIIT by keeping your total income under the NIIT thresholds. You could consider paying a dividend or realising capital losses to do this.

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