Where stocks and other liquid assets are concerned, nearly all of us are familiar with the time-tested axiom, “Buy Low, Sell High.” But, as much as we try to adhere to that principle whenever possible, there are times when it does make sense to sell at a loss, specifically, when tax time rolls around, as doing so can provide some decided benefits. This is a strategy known as tax-loss harvesting, and despite its potential advantages, several factors must be taken into consideration before deciding whether to put it to use. And, please rest assured that no tractors or other farming equipment is involved.
In this new episode of A Place of Possibility™, we’ll cover the nuances of tax-loss harvesting, including the factors determining whether or not it makes sense in a given situation.
We’ll be talking about:
- What tax-loss harvesting entails
- Why tax-loss harvesting can be a powerful financial strategy at tax time
- When tax-loss harvesting makes sense . . . and just as important. . . when it DOESN’T
- An additional gifting strategy to fund college education that surprisingly quite often makes more sense than traditional college financing
Our objective with this episode is to enhance your understanding of this potentially powerful strategy that can substantially reduce your tax liability under the right circumstances. Because knowledge is power, right? We look forward to sharing some of our insights on tax-loss harvesting with you and hope you’ll pass this episode on to your family and friends.
P.S. Looking to meet with Richard or Angela at our office in Alamo, CA? Want to discuss more of what you heard in this episode? Wondering where the heck you need to get started or what all of this means for your retirement plans? Schedule a free 30-minute session and find the peace of mind you deserve for the rest of your life. You can also reach us by calling 925.736.6410 or sending an email to Info@APlaceOfPossibility.com.
“Let’s say you’ve sold something in your portfolio that has a $50,000 capital gain this year, but you also have some holdings in your account that have lost money. If you wanted to recognize a $25,000 loss in the assets that have gone down, and sell those holdings during the same year that you recognize the $50,000 gain, you’ll only be paying tax on the net amount of $25,000. For a married couple that’s in California and has $150,000 of adjusted gross income, the tax savings are going to be almost $6100.”
We’re proud to present you with our “Know Your Possibilities Guide,” a tool and free resource for you to take notes, review, keep on hand, or even share with your friends and family. So grab your copy, click the play button and follow along. You’re just minutes away from discovering your next Place of Possibility.
A Glance at this Episode:
2:57 To kick off our discussion, let’s take a closer look at exactly what tax-loss harvesting is. And don’t worry, there is no manual labor involved.
4:00 Now that we know no crops involved in this type of harvesting, let’s go over how you put tax-loss harvesting to use.
5:42 Since many investments are purchased in increments — known as tax lots — and at varying prices, let’s examine how to approach tax-loss harvesting in this situation in order to maximize its benefits.
7:11 Start listening now to hear further insights from Richard and Angela on wisely choosing different assets and how to decide when to hold on to those new assets or sell them.
8:15 As you may have guessed, there are some caveats to consider when contemplating tax-loss harvesting. Here’s what you need to know.
9:10 Storytime! Let’s look at a few scenarios where tax-loss harvesting makes immediate sense.
11:47 Next, let’s examine a scenario where tax-loss harvesting makes sense, primarily if it will reduce tax liability brought on by real estate capital gains.
13:19 Not every financial scenario is conducive to this strategy. Let’s take a look at an example where it’s not a good idea to do tax-loss selling.
15:13 Knowing where you’re at in terms of gains and losses is important. It will help you know when to hold off on tax-loss harvesting. Listen in as Richard and Angela share more insights.
15:58 Now, let’s examine some stage of life milestones where correlated income spikes make tax-loss harvesting a logical strategy.
18:02 Q&A: Are there times when I should generate a capital gain instead of harvesting a loss? Yes, let’s discuss.
18:54 Did you know that you can gift an appreciated security to your college-bound children to help fund their education? And surprisingly, it makes considerably more sense than simply cutting a check, but the process must be navigated carefully. Press play for more on how to do this the right way.
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Links/Resources Mentioned in this Episode:
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- Del Monte Group offers a variety of free resources to help you make innovative and educated financial decisions so that you can keep, grow, and enjoy your wealth starting now. Find them by visiting https://aplaceofpossibility.com/resources.
“One-size-fits-all” won’t fit you here! The Del Monte Group team understands that everyone’s financial goals are unique. That’s why we always provide customized advice. No matter where you are in life, you can depend on our proven expertise to provide financial planning support for long-term success. Ready to get started? Schedule a meeting with Richard or Angela in our Alamo, CA based office today or we can meet via Zoom! >> You can select a date and time that works for you via our calendar, call us at 925.736.6410, or send an email to Info@APlaceOfPossibility.com. We can’t wait to help you!