It’s Time To HarvestSubmitted by Prosperity Advisory Group on November 3rd, 2018
by Sara Stebbins
The strategy of buying low and selling high in the investment world seems like a win-win, but investors who get this right need to consider how being right affects them. If you were successful with the buy-low-sell-high strategy and your investments paid off with great returns, you may also be paying up in the form of capital gains tax. This is a great time of the year to review where you stand on capital gains and see if tax loss harvesting is right for you.
While you pay more favorable rates on long-term capital gains, it is still recommended to see if there are ways to reduce capital gains through tax loss harvesting. Tax loss harvesting is the practice of selling an investment that has an unrealized loss and, thus, realizing or “harvesting” the loss. This loss is able to offset both realized capital gains and up to $3,000 of income on your tax return for the year with the remainder being carried forward.
Note that you cannot simply sell an investment solely for the purpose of paying less taxes. Thus, the IRS will disallow the loss if the same or substantially identical asset is purchased within 30 days of selling the investment for a loss. This is referred to as the wash-sale rule.
To learn more about tax loss harvesting, contact Prosperity Advisory Group and see if it is an appropriate strategy for you.
*This piece is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.