2023 is coming to an end. Are you prepared?
To help you make the most of your year as you continue to build and protect your assets for retirement, I’d like to share a quick strategy -- tax harvesting.
What is Tax Harvesting?
Every time you sell a position in your portfolio for a profit, this is a taxable event, meaning the sale proceeds will be taxed. However, recorded losses from sales reduce your taxable income. Simply put, tax harvesting, also known as “tax-loss harvesting,” is intentionally selling investments at a loss to offset gains.
Tax harvesting is only intended to offset gains from sales. If you have not sold an equity at a profit in the last year, selling any of your positions at a loss is unnecessary.
Before attempting to tax harvest, discussing this strategy with your financial advisor and asking for their help is advised.
The “Wash-Sale Rule”
The Wash-Sale Rule requires you to stay out of an investment for a minimum of 30 days before repurchasing in order to record losses for tax harvesting.
For example, if you sell Coca-Cola (KO) at a loss, you cannot repurchase KO within a 30-day period and still offset your gains. However, the Wash-Sale Rule doesn’t prevent you from purchasing a stock or ETF in the same industry, meaning you might not be able to repurchase KO, but you can purchase Pepsi (PEP), Monster (MNST), National Beverage (FIZZ), and any industry-related ETF.
Have a great end to your year, and if you need any assistance, please don’t hesitate to contact the Blooming Tree Wealth Management team here. I also hope you will join me for the Q4 BTWM Virtual Lunch Webinar on 11/9 at noon. No RSVP is needed, just click on the following link to join us live: https://www.gotomeet.me/RyanOConnell-BTWM