Make Those Losses Count!

This week we are delving into a powerful strategy to help optimize your investment returns: Tax-Loss Harvesting.

Tax-loss harvesting is a technique that involves strategically selling investments that have experienced losses to help offset capital gains and thereby reduce your tax liability. Here’s what you need to know:

Capitalizing on Market Volatility: Market fluctuations are a natural part of investing, and while downturns may seem daunting, they also present opportunities for tax-efficient portfolio management. By identifying investments with unrealized losses, you can leverage those losses to help offset gains in your portfolio, potentially reducing your tax bill and optimizing portfolio rebalancing strategies.

Rules and Limitations: Tax-loss harvesting is subject to specific rules and limitations set by the IRS. For example, you can use harvested losses to offset capital gains dollar for dollar. If your losses exceed your gains, you can use up to $3,000 of net losses to offset ordinary income in any one tax year, with any remaining losses carried forward to future years.

Long-Term Planning: While tax-loss harvesting can provide valuable tax benefits, it is essential to consider the long-term implications for your investment strategy. Be mindful of maintaining your desired asset allocation and avoid unnecessary trading activity that could hinder your overall investment plan.

Tax-loss harvesting is a powerful tool in your financial toolkit. Put it to work!

Minimize Taxes, Optimize Returns

Let's work together to help optimize your investment returns using powerful strategies like tax-loss harvesting and other tax-saving methods. If you have $1 million or more of investible assets and are in or close to retirement, let's connect on a complimentary strategy call.

Neither Edelman Financial Engines nor its affiliates offer tax or legal advice. Interested parties are strongly encouraged to seek advice from your qualified tax and/or legal professionals to help determine the best options for your particular circumstances.