Fall Into Smarter Tax Planning This Season
As the leaves change and the year winds down, it's a perfect time to reflect and refresh your tax strategy. Embrace this autumn as an opportunity for a ‘financial fall cleaning’ with tax-loss harvesting, setting the stage for a strong finish to the year and a solid start to the next.
Why Tax-Loss Harvesting Might Work This Fall
Tax-loss harvesting is a strategy where you sell investments at a loss to offset gains elsewhere. Consider this: if you have a $5,000 gain from Stock A and a $4,000 loss from Stock B, the loss can reduce your taxable gain. Moreover, if your losses exceed gains, you can reduce regular income by up to $3,000 and carry forward the excess to future years.
Benefits to Highlight
- Reduce Your Tax Bill: Lowering capital gains and potentially reducing regular income taxes is a significant advantage.
- Turn Setbacks Into Tax Savings: Transform investment losses into valuable tax benefits.
- Clear Out the Clutter: Like a fall clean-up, align your investments with your financial goals.
Potential Pitfalls to Mention
- Wash Sale Rule: Be aware of the 30-day repurchase restriction, which can nullify your loss claim.
- Limited Benefits in Some Situations: Lower gains or a lower tax bracket might lessen the impact.
- Emotional Investing Risks: Avoid clinging to underperformers based on hope rather than strategy.
Remember, tax-loss harvesting isn't one-size-fits-all. It's most effective when aligned with your financial goals. As the year-end approaches, review your portfolio and consider seeking professional advice. This season, take confident steps towards a more confident financial future. Reach out to us for a personalized review.
Tax-loss harvesting is a strategy of selling securities at a loss to offset a capital gains tax liability. It is typically used to limit the recognition of short-term capital gains, which are normally taxed at higher federal income tax rates than long-term capital gains, though it is also used for long-term capital gains. show less