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Year end is Tax Loss Harvesting time!
What is tax loss harvesting?
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What is tax loss harvesting?
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Investors in the US are allowed to report a small amount of capital losses ($3k) each year to offset any income.
One strategy to reduce your taxes is to sell positions that are showing losses before the end of the year.
Anything over $3k is carried forward to future years.
One strategy to reduce your taxes is to sell positions that are showing losses before the end of the year.
Anything over $3k is carried forward to future years.
Unfortunately there is a wash sale rule where if you repurchase the stock within 30 days the loss is invalidated.
So it is good to have a replacement investment waiting or be ok waiting 30 days to reinvest.
So it is good to have a replacement investment waiting or be ok waiting 30 days to reinvest.
This works especially well for equivalent strategy ETFs.
Let’s say you hold an S&P 500 index fund like $VOO with a capital loss.
An equivalent ETF would be $SPY.
So you would sell shares in $VOO, collect the tax loss, and buy $SPY.
Let’s say you hold an S&P 500 index fund like $VOO with a capital loss.
An equivalent ETF would be $SPY.
So you would sell shares in $VOO, collect the tax loss, and buy $SPY.
Robo advisors like Wealthfront and Betterment are very good at doing this automatically in their taxable accounts.
I have both but prefer Wealthfront
Referral link https://wlth.fr/2oearC6
I have both but prefer Wealthfront
Referral link https://wlth.fr/2oearC6
Always consult your tax and financial advisor before pursuing this strategy!
And if you want to learn more about index funds check out @thewealthdad’s book on index funds
Referral https://gumroad.com/a/819786867
And if you want to learn more about index funds check out @thewealthdad’s book on index funds
Referral https://gumroad.com/a/819786867
