#SaturdaySchool #TaxLossHarvesting
😂 I know my Asian followers are probably cringing inside a little bit w/ that #SaturdaySchool tag, but I did say I would use my Saturday for tax efficiency related teaching. Since the capital gains tax was popular this week. This lesson is simply meant to be an introduction to the concept of Tax Loss Harvesting and should be supplemented by your own reading.
WHO should use Tax Loss Harvesting:
- This should not be the main reason for selling your asset - the common phrase is "Don't let the tax tail wag the dog"
- This is applicable to both those who do a standard or itemized deduction
- This can be used to lessen the sting of having to sell off an investment that did not pan out
WHAT is Tax Loss Harvesting:
- Involves selling an asset to realize tax loss to offset taxable income and then immediately buying a similar (but slightly different) so that money stays invested in the stock market
- Up to $3,000 per year (or $1,500 if married filing separately) but any additional can be carried forward
- You need to be careful of the wash sale rule - this is one you need to read (too much for here)
WHERE can I learn more about Tax Loss Harvesting:
- Look at the resources below
WHEN should I consider Tax Loss Harvesting
- Often times this can be done periodically when rebalancing or at end of year, especially if you need to offset short term capital gains
WHY should you do Tax Loss Harvesting:
- Sometimes you buy a lemon and need to make lemonade ... this helps lessen the sting and technically it is your money anyways, why overpay unnecessarily
HOW do you Tax Loss Harvest:
- This can only be done in taxable accounts - NOT retirement savings accounts
- Simplest way is to sell the stock and buy an ETF that has that stock as a concentration (ex: Sell $TSLA for loss buy buy $ARKK or $FDIS which has a high concentration in $TSLA )
- Be mindful of the 30 day rule before and after selling to avoid wash sale rule and not that this applies across all investment accounts such as other brokerage accounts or retirement savings accounts
P.S.: I wanted to extend a warm welcome from the #PublicCommunity to @traderdanielle - she may only have 10 Followers and 18 Following at the last time I checked but she is probably a heavy hitter in the knowledge department as VP of Options at Simpler Trading (www.fivestartrader.com), CNBC & Fox Business Expert, and a booming Twitter following! She is probably someone you want to follow and learn from. I know I do!
Resources:
- https://www.youtube.com/watch?v=H_XsLvg0uDI
- Look under the comments for a list of resources I found helpful
#TaxEfficiency #TaxTail #TheMoreYouKnow #BuildCommunity
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