Tax Loss Harvesting Explained

Take advantage of LOWERING your taxable income for the year through tax loss harvesting…
 
This technique can be used on taxable non-qualified brokerage accounts.
 
There are two ways in which you can utilize this method; use investment losses to offset any capital gains in the account OR realize an investment loss up to $3,000 of income on the year-end tax return.
 
Offsetting capital gains with losses can be a great way to rebalance a portfolio in your account.
 
Let’s say you invested in company XYZ that has provided a great return and generated a generous amount of capital gains. Through the practice of tax loss harvesting, you can use losses of other position(s) in your portfolio and net out the capital gains in XYZ.  
 
Individuals are also allowed up to $3,000 worth of capital losses. This technique enables investors to use the losses as a deduction of income on their tax return.
 
Investors should consider tax loss harvesting by selling depreciated assets that no longer fit in their volatility tolerance, selling assets at a loss to offset any other gains in the portfolio, or use the $3,000 worth of losses deducted against income for the year.
 
Wash Sale Rule…
 
If you do not follow this rule when selling a security at a loss you will not be allowed to deduct the loss on the tax return.
 
“Investors who liquidate their losing positions must wait at least 31 days after the sale date before buying the same security back if they want to deduct the loss on their tax returns” (IRS.gov).