Navigating U.S. tax obligations from Israel can overwhelm many olim, especially when faced with unexpected tax bills. A common source of surprise is the difference between realized and unrealized gains. Realized gains occur when you sell an investment for a profit and are taxable in the year of the sale. Conversely, unrealized gains, which represent the increase in value of investments you still hold, are not taxable until they are realized.
Realized Losses Can Offset Gains
A strategic approach to reducing tax liability involves realizing losses to offset gains. For example, if you sell an investment at a $10,000 loss, it can partially offset a $30,000 gain, thereby reducing your taxable gains to $20,000. This method not only lowers your tax due but also helps optimize your investment strategy in the long run. (This article is intended for educational purposes only and does not constitute tax advice. Always consult with a qualified tax advisor for advice on your specific circumstances.)
Ensuring Accuracy in Tax Reporting
Proper documentation is key to accurate tax planning. The Form 1099 from your U.S. brokerage might not tell the whole story, especially concerning “non-covered transactions.” These are trades or sales of assets bought before new IRS reporting requirements were implemented in 2011. Therefore, they may not be fully reported in the 1099 form. It’s essential to combine information from both your 1099 and December statements to ensure no investment goes unreported or misreported. This comprehensive approach prevents overpayment on taxes and ensures your filings are complete. Learn more in “Understanding Tax Implications in Investment Portfolios” by clicking here.
Collaborate with Experts
Effective tax management is crucial, especially for olim managing investments across borders. Collaborating with financial advisors and tax professionals can provide a comprehensive understanding of your tax obligations and help tailor a strategy that best suits your financial goals.
Need Expert Advice?
For tailored advice and strategic financial planning for your U.S. brokerage and IRA accounts, contact our office at (02) 624-2788.
Douglas Goldstein, CFP® is the director of Profile Investment Services, Ltd. www.Profile-Financial.com He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published June 11, 2024.