As 2024 comes to a close, many savvy investors are turning their attention to strategies that can reduce their tax liability. One powerful tool at your disposal is tax-loss harvesting, which allows you to offset capital gains and minimize the taxes you owe. Whether you've had a stellar year in the market or faced some losses, this strategy can help you keep more of your hard-earned money.
What Is Tax-Loss Harvesting?
Tax-loss harvesting is the practice of selling investments that have declined in value to realize a capital loss. These losses can then be used to offset your capital gains from winning investments, and if your losses exceed your gains, you can use up to $3,000 to reduce your ordinary income. Unused losses can even be carried forward to future years.
Example:
Capital Gains: $10,000
Capital Losses: $8,000
Net Taxable Gains: $2,000
If your losses exceed your gains, say you had $12,000 in losses, you could use $3,000 of that loss against your ordinary income and carry forward $9,000 to offset gains in future years.
Why It’s Important to Act Now
Timing is everything when it comes to tax-loss harvesting. Transactions must be completed before December 31, 2024, to count for this tax year. By taking action now, you can ensure you’re in the best possible position when tax season rolls around.
Key Considerations
Wash Sale Rule: If you sell an investment to realize a loss, you can’t repurchase the same or substantially identical security within 30 days before or after the sale.
Long-Term vs. Short-Term Gains: Losses must first offset gains of the same type (short-term vs. long-term) before being applied to the other.
Professional Guidance: Tax-loss harvesting can get complicated, especially if you're juggling multiple accounts or complex investment strategies.
Who Benefits the Most?
Tax-loss harvesting isn’t just for high-net-worth investors. Anyone with taxable investment accounts and capital gains can potentially benefit. However, it’s essential to ensure the strategy aligns with your overall financial goals and doesn’t disrupt your investment portfolio.
Don’t Leave Money on the Table!
Tax-loss harvesting is a valuable tool, but it requires careful planning and execution. Our team at JS Tax Corp specializes in helping clients navigate the complexities of tax planning and investment strategies to maximize savings.
Act Now to Secure Your Savings
The clock is ticking! Book a consultation today to review your portfolio, identify tax-saving opportunities, and prepare for a stress-free tax season.
Let’s work together to make the most of your 2024 tax planning!
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