Find the silver lining when markets fall by checking for “tax-loss harvesting” opportunities
Markets have been roiled with persistent inflation and historic interest rate increases. But the market downturn this year does provide an opportunity for you to unlock potential tax benefits.
Tax-loss harvesting is the act of selling assets that have taken a loss, then using those realized losses to offset realized capital gains as well as ordinary income in a taxable account.
Harvested losses can be used, dollar for dollar, to offset realized capital gains. In addition, investors can offset up to $3,000 per year of regular income with realized losses. If an investor recognizes more losses than gains, or has already offset the $3,000 income cap, losses can be carried forward indefinitely.
Investors may then use sales proceeds to either buy similar investments to maintain current portfolio objectives, or they can use the opportunity to shift to an investment with a different goal. Given the drawdowns in both equities and bonds this year, investors have an unprecedented opportunity to reset and modernize portfolios with potentially higher conviction investments.
Be aware that rules preclude investors from recognizing losses and then quickly buying back their original investment. These “wash sale” restrictions mandate that an investor cannot realize a loss on the sale of an investment and then buy a “substantially identical” security, beginning 30 days before and ending 30 days after a security sale.
Oakway Financial offers a FREE Tax Evaluator to help you identify tax-loss harvesting opportunities, monitor taxable distributions and find replacement investment ideas. While current market volatility may get your portfolios down, tax-loss harvesting can add value back for a potentially stronger finish to the year. Give us a call to schedule your free evaluation and uncover your silver lining.
-Brian Lipsett
303.974.0629
Info@OakwayFinancial.com