It’s that time of the year again—yes, the holidays, but an equally festive period of harvesting tax losses. Yes, you read that right. Harvesting losses on investments can be like having your pie and eating it too, financially speaking. Let’s delve into this opportunity that’s often as overlooked as that last piece of pie at Thanksgiving dinner.
Why Harvest Tax Losses?
Nobody enjoys seeing red in their investment portfolio, but it doesn’t have to be all doom and gloom. You can strategically sell off losing investments to offset your capital gains or even reduce your ordinary income by up to $3,000. That’s a win in my book!
But Wait, There’s a Catch!
Don’t just indiscriminately sell off losing investments like you’re clearing out your attic. This is a calculated move. Dumping an investment solely for a tax break could cost you more in the long run if that asset has the potential for future growth. It’s about strategy, not panic.
Not sure which losses to harvest? This is a complex dance that we’re happy to guide you through. Reach out for personalized advice tailored to your investment portfolio. It’s also worth noting that you don’t have to be a millionaire to harvest tax losses, especially with the economy being so
Timing Is Everything
Sure, the market is unpredictable, but the calendar isn’t. Tax loss harvesting generally makes the most sense at year-end when you have a clearer picture of your capital gains and income situation. However, don’t wait until the ball drops on New Year’s Eve. Act now!
One More Thing: The Wash-Sale Rule
A quick heads-up: The IRS prevents you from claiming a loss on a sale if you buy the same or a “substantially identical” investment within 30 days before or after the sale. It’s called the wash-sale rule, and yes, it’s as tricky as it sounds. While experienced traders can often pull this off without worry, it’s never a bad idea to get a little help and guidance before (potentially) getting caught with your hand in the cookie jar.
So, don your financial farmer’s hat and start harvesting those tax losses. It’s like tending to a garden; sometimes you have to remove the weeds to help the rest of the garden flourish.
All the best,