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Delegating Tax Loss Harvesting to Your Team

Posted by Jarrod Musick | October 25, 2017

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One of the biggest pain points that our clients bring up with us during our initial conversations is that their taxes are high and complicated, and that they need help simplifying the process. Delegating the operations of your financial life can dramatically decrease the amount of time and emotional energy you must devote to it. There are a number of simple strategies that you can delegate to your tax or investment team, but one of the best is how to limit the amount of taxes that result from the performance of your investments. Below we discuss tax loss harvesting, a tool that you can use to help reduce your taxes.

 

If you are not familiar with the term, don’t worry. Most of our clients are not familiar with the idea of tax loss harvesting when they begin working with us. As a bit of background, tax loss harvesting is a term that describes selling assets that may be worth less than when you purchased them so that you can recognize an investment loss for that year’s taxes. Why would you actually want to sell something for less than what you paid for it? One reason is that you can use that loss to offset some of your gains, or even to offset a portion of your taxable income and reduce your total tax bill. For instance, say you had sold Stock A for a gain of $5,000 earlier in the year and then at the end of the year you sold Stock B for a loss of $4,000. When you do your taxes, you would net those out and only have to pay tax on the $1,000 gain. If your capital gain tax rate was 15%, your tax bill would be reduced by $600.

 

Tax loss harvesting can be used even if you would prefer owning the asset that you sold for a loss. For example, if you own shares of a company that you would like to continue holding, but shares are now worth less than you paid for them, you can sell the shares to recognize the loss (in order to recognize the loss on your tax return, you will need to wait at least 30 days before repurchasing the stock). The tax rules are tricky in this area, so always consult your tax or investment professional before making these decisions.

 

You can see how considering each of your assets individually, as well as your investments in total, can be an intensive process. That is why our team at Destiny Capital considers tax loss harvesting and other tax management strategies as a part of our ongoing client service, saving you time and energy. So, when it comes to tax management, don’t try to do it alone. Delegate it to your team and put those hours back into something that you enjoy!


 

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