When it comes to investing let’s face it, you win some, you lose some. While capital gains are always the goal, sometimes selling shares incurs a loss – but is it all bad? Not when you consider the “glass half full” strategy – “Tax Loss Selling”.
What is tax loss selling?
Tax loss selling is a tax planning tool that can reduce potential tax liability by minimizing capital gains. So, if you have realized capital gains during the year, and don’t mind selling investments at a loss to help reduce your taxes, then tax loss selling is a strategy for you.
How it works
Let’s say you have two securities, ALPHA and BETA. During the year you decide to sell security ALPHA which would yield a capital gain, but you also held security BETA which underperformed and has an unrealized loss. If you sold security BETA as well, you could recognize the losses and reduce your overall capital gain, which reduce the taxes you pay. In this way, your loss could become a win!
What else you should know
In order to take advantage of the tax savings of this strategy, remember that December 27, 2019 is the last day to sell your shares. This is because only trades settled on or before December 31 will be considered for tax purposes. If you would like more information on tax loss selling, give us a call today and let us help you WIN at the tax game.