What is Tax Loss Harvesting

October 17, 2022

Tax loss harvesting is the act of selling assets that have lost value to offset gains on assets that have appreciated in value. This has been a popular strategy among large institutional investors for some time, but it has recently become more mainstream and available to individual investors as well.

Tax loss harvesting is done during the year, and it's done when you have capital gains. If you don't have any capital gains, there's no need to tax loss harvest because you'd be selling assets for no reason (you won't have any gains to offset). If your capital gains exceed your capital losses, you're not doing anything out of the ordinary: if you sell an asset for more than you bought it for, you have a taxable gain. When it comes time to file your taxes at the end of the year, though, you can lose some of that profit—to the benefit of your portfolio—if you tax loss harvest.

Tax loss harvesting allows you to take advantage of how tax laws are structured. When two similar securities are purchased within 30 days of each other and sold within 30 days of each other, they're treated as one security. If they're sold at a different price than they were purchased at, a capital gain or loss will be created.


STAY UP TO DATE WITH US
180 Glastonbury Blvd.
Suite 102
Glastonbury, CT 06033
Client Relationship Summary
This communication strictly intended for individuals residing in the states of CA, CO, CT, FL, GA, IL, IN, MA, MD, NC, NH, NJ, NY, NV, OH, OR, RI, SC, TN, TX, VA. No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services. Investments are not FDIC- or NCUA-insured, are not guaranteed by a bank/financial institution, and are subject to risks, including possible loss of the principal invested. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA, SIPC, a Registered Investment Adviser.
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram