If you’re among those showing losses in your stock portfolio, don’t forget that you can use those losses to reduce your taxes.
This glass-half-full strategy is called tax-loss harvesting.
The concept is simple: You strategically sell an investment in a taxable account at a loss and use that loss to offset a taxable gain elsewhere in your portfolio or your personal income tax. Keep in mind that there is a $3,000 annual limit, but you can carry over losses above that amount for use in future years. (That’s where the “harvesting” concept comes in.)
Like a lot of simple tax concepts, the details can get complex. For example, there are rules around reinvesting in the same securities you sold at a loss. This wash-sale rule says you can’t buy an identical or substantially identical security for 30 days before or 30 days after you realize the capital loss. It gets complicated when you factor in options, vesting dates, employee stock purchase plans, your spouse’s accounts and more.
You’ll want to work closely with your CPA and financial advisors to ensure you achieve the outcome you desire.
Tax-loss harvesting is just one of many strategies that can help you keep more of your hard-earned money come tax time.
Our team can help you build and execute a wealth and tax strategy that will serve you and your family for years to come. Schedule a free call with the team at TFW Advisors® to find out more! We’d love to talk about how when you change your facts, you can change your tax.