Can you tell it is tax time?
Lot’s of tax posts from now until the end of the year … just as a heads up!
As the year nears end, tax harvesting begins.
Good tax planning most of the time means neither showing big losses or certainly big gains. While never an exact science, appropriate planning helps surprises in April!
Losses, under current tax laws are restricted to $3k deductions on investments such as stocks and bonds (Active investments.) Larger losses are suspended and then pulled forward in future years.
Sales and an immediate repurchase are a neat way to realize/step up in basis gains and offset losses.
Sales of a loss and careful re-investment will realize a loss (Wash sales rules prevent the immediate repurchase of the same security for loss realization – Gains are not held captive to this rule for obvious reasons.)
Capital Gains are distributed by many packaged products such as indexes and funds near the end of the year in most cases. Many of these gains are available in advance due to a November year end for many packaged investments, helping with planning now.
Bottom line … you may see a few transactions as Donald “The Brain” does his tax magic!
Have a Great “Tax Harvesting” Day!
John A. Kvale CFA, CFP