Tax Loss Harvesting Opportunity
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With the market down, there may be an opportunity to harvest tax losses by locking in capital losses that can offset gains on your tax return.
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Cody Garrett shared this a few days ago:
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u201cWe don’t seem to have this opportunity very often, but tax loss harvesting is gaining popularity this month.
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Here’s a video I recorded showing how I locked in realized capital losses for tax purposes and immediately reinvested (in other securities) to avoid timing the market.
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This is an example of how it’s done at Fidelity, but other custodians (Vanguard, Schwab, etc.) have similar processes.
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This is NOT investment or tax advice for you, but rather an educational tutorial.u201d
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Tax Loss Harvesting (Quick Refresher)
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Tax loss harvesting is where you sell an investment at a loss (realized capital loss) to offset capital gains and reduce your tax bill.
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Most brokerages make this easy with u201cspecific identification.u201d The one rule to know: the wash-sale rule. You canu2019t buy a u201csubstantially identicalu201d investment within 30 days before or after the sale, or the loss is disallowed.
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The goal, then, is to stay invested while avoiding that rule by swapping into a similar (but not identical) fund.
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Example: sell a Total Stock Market fund and buy an S&P 500 fund instead.
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Do your own research, but the principle is simple: capture the loss, stay in the market, and avoid the wash-sale.
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