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Tax Loss Harvesting – What this strategy is all about?

Wooster Corthell |

In the vast universe of financial strategies, Tax Loss Harvesting (TLH) shines brightly. But what is it, and how can it bolster your financial health? Let us make the complexities of TLH become a clear pathway to potential tax benefits.

Tax Loss Harvesting

At its core, TLH is the art and science of selling securities at a loss to offset capital gains tax liability. Simplified, if you have investments that have lost value since purchase, selling them can help reduce the tax on other investment gains or regular income. Please note taxable accounts are eligible for TLH, this is not available for IRAs and other retirement accounts.

Why Consider TLH?

  1. Offsetting Capital Gains: If you've secured profits on some investments this year, those gains are taxable. TLH can help negate some, if not all, of that tax.

  2. Rebalancing: By strategically realizing losses, you're also given an opportunity to reassess and reallocate assets to better align with your financial goals.

  3. Carry Forward Benefits: If your harvested losses exceed your gains, you can use up to $3,000 of the excess to reduce your taxable income. Any remaining losses can be carried into future tax years. It is best to harvest these losses for years leading up to retirement so during the distribution phase these losses can offset the gains as retirement commences.

Navigating TLH

Venturing into the realm of TLH without guidance can be daunting. That's where our advisors can help:

  1. Customized Analysis: Our team dives deep into your portfolio, identifying positions that offer meaningful tax loss harvesting opportunities.

  2. Strategic Execution: TLH isn’t just about selling at a loss. It’s about smartly reinvesting those funds, and Wooster Corthell will prioritize the way the reentry strategy complements your long-term financial vision.

  3. Monitoring & Rebalancing: Tax loss harvesting isn't a one-time event. Our firm consistently monitors your portfolio, ensuring that it remains optimized.

Steering Clear of Pitfalls

Like any strategy, TLH isn't without its complexities. One crucial point to watch for is the “wash-sale rule,” which prohibits investors from claiming a loss on a sale and then repurchasing the same or a "substantially identical" security within 30 days.

 

Ready to see how TLH can integrate into your financial tapestry?

Why not reach out to us for a personalized exploration of TLH possibilities? And for more illuminating financial insights, connect with us on LinkedIn.

 

Tax Planning: Wooster Corthell does not act as an accountant, and this is not to be construed as tax advice. Please consult with your tax preparer to discuss your personal tax situation.