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Optimizing After Tax Wealth During a Volatile Market: Tax Loss Harvesting
Optimizing After Tax Wealth During a Volatile Market: Tax Loss Harvesting
What is Tax Loss Harvesting?
Tax Loss Harvesting is a tax strategy that allows a client to:
- strategically sell investments that have declined in value
- harvest that loss to use against realized gains (or future realized gains)
- and stay fully invested in the market.
What kinds of gains could an individual use these losses against?
- the sale of investments
- sale of land
- sale of a business
- sale of other assets
When should I start Tax Loss Harvesting?
Tax Loss Harvesting is not a reactive strategy, where someone realizes they have a large tax bill looming and they want to harvest for losses to offset these gains.
This is a strategy that is employed by a professional investment advisor to proactively plan for an individual to keep more after-tax wealth.
How do I do it?
For tax loss harvesting to be most effective, this strategy requires the coordination of a professional advisor with a CPA. Talk to an advisor about your options.
Are there any additional considerations to Tax Loss Harvesting?
- Wash Sale
- Losses have to match gains (long term or short term)
- At times there may not be any losses to harvest
***While tax loss harvesting can be a valuable strategy, its effectiveness depends on your individual financial situation and tax circumstances.
Securities offered through Avantax Investment ServicesSM, Member FINRA,SIPC. Investment advisory services offered through Avantax Advisory ServicesSM. Insurance services offered through an Avantax affiliated insurance agency.
Rushton and Avantax are not affiliated.
Tax services are provided by Rushton are separate and apart from Avantax.
The strategies mentioned may not be appropriate for all investors. Please consult your financial and/or tax advisors to determine a strategy that works best for you.
The views and opinions presented in this article are those of Rushton and Rushton Wealth Management and not of Avantax Wealth Management® or its subsidiaries.
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Past performance is not a guarantee of future results. Neither diversification nor asset allocation can assure or guarantee better performance/profit and cannot eliminate the risk of investment losses in declining markets.
While tax loss harvesting can be a valuable strategy, its effectiveness depends on your individual financial situation and tax circumstances.
Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty.
Converting from a traditional IRA to a Roth IRA is a taxable event.
A quick guide on how to scan documents with your phone
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