How to use your 2018 tax return to guide investment in 2019

Not every investment is a winning one. If the value of your investments took a hit in 2018, it can discourage you from investing in 2019. Luckily, you can usually get a tax break on losses through declaring a capital loss deduction. This could result in valuable savings on your 2018 tax return.

What is capital loss deduction?

Capital loss counts against your taxable income. You can use Schedule D of Form 1040 to calculate and claim your capital loss deduction. Capital losses are loosely defined as either short-term or long-term investments sold at a lower price than they were bought that you do not buy back within 30 days. You can reclaim a portion of lost income on that sale through capital loss deductions.

Additionally, if you sold investments and have more short-term or long-term capital gains than capital losses, you can combine these appropriately and only claim the resulting amount as income. If you have more losses than gains, you can claim up to $3,000 and deduct those losses from your earned income.

How can you invest your 2018 tax return?

If you have more than $3,000 in capital losses, the remainder can carry over into the next year. You can think of this as a kind of “debt” that does not expire and does not have a time limit. If it is a significant amount of debt, this might guide you to make investments at a lower risk rate for 2019.

This is just one of many investment strategies. Other investment uses for 2018 tax refunds include:

  • Increasing retirement account contributions
  • Paying off high-interest debt
  • Renovating your home or business to increase resale value
  • Opening a credit account with valuable benefits
  • Filing quarterly taxes and paying ahead

If you can start investing early with as much risk as you can afford, with patience your investments can really pay off. The investing arena is huge and noisy. A disciplined approach to investing and a steady financial advisor can help you tune out this noise and make the decision that’s right for you.

Our attorneys counsel startup companies, small businesses and large corporations. They are also familiar with various options related to reducing business owners’ tax liability including:

  • entity selection (LLC, S corporation, partnerships);
  • dissolving business entities;
  • business succession (estate taxes);
  • sale or purchase of a business and assets;
  • mergers and acquisitions;
  • commercial real estate transactions;
  • 1031 exchanges;
  • Expensing and depreciation;
  • structuring salaries and benefits;
  • deferred compensation;
  • business tax credits

Tax Planning for Individuals

Our attorneys advise business owners, high net worth individuals and other clients on individual income tax strategies including:

  • applicable tax credits;
  • allowable expenses and deductions;
  • gifting to family and charitable giving;
  • estate planning and administration


Paul O’Riordan