As the end of the year approaches, we’d like to talk to you about one way to potentially lower the taxes you pay.
It’s a technique called tax-loss harvesting and it’s designed to help you reduce your capital gains taxes by selling assets that have lost value.
Our team of experienced professionals only works through this model when it’s appropriate.
It can seem complicated (and not always a good idea), so here are 3 things you should know:
1) Determine whether you have short-term or long-term gains. If you sold an asset that you held for less than a year, you generated short-term capital gains. And these are taxed at higher rates than long-term capital gains.
2) Separate your apples and oranges. When selling assets for a loss to offset your capital gains, you need to keep apples with apples and oranges with oranges.
Short-term losses are used to offset short-term gains, while long-term losses offset long-term gains.
3) Don’t let your tax bill drive your whole strategy. It’s generally a bad idea to sell assets strictly to harvest a tax loss, especially if those assets still belong in your portfolio.
No one likes paying taxes, but ultimately, your goal is to build wealth – make your investment decisions with that goal in mind.
We can work together to identify the right time to liquidate underperforming investments if it makes sense for you.
Bottom line: Tax-loss harvesting can be a savvy way to reduce your capital gains taxes, but it needs to be coordinated with your overall planning.
Want to think it through together? Please contact our investment advisor representatives. This is a time-sensitive move, so let’s talk soon.
P.S. Know anyone who could use a second opinion on their portfolio strategy this year? Please let us know, we will work with your CPA or tax specialist to coordinate your tax strategy. We’ll try to be available for them before the end of the year.
Prevail Innovative Wealth Strategies