Believe it or not, 2022 is almost over.
That means it’s time to start thinking about end-of-year tax planning strategies…
Especially since it’s been such a painful year for the markets, with most stocks slipping into the red. As you can see below, at the time of this writing, the S&P 500 and the Nasdaq are down 15.78% and 27.99%, respectively. Even the Aggregate Bond Index has fallen 12.92%.
Now, depending on when you bought in, you might have some losers in your portfolio. But even though the current bear market has been challenging (to say the least), it’s not all bad news because there’s a silver lining to lagging investments—one that can help you save some money this upcoming tax season.
I’m talking about tax loss harvesting. It’s something you should be considering this time of year. I know I am.
How Does Tax Loss Harvesting Work?
Tax loss harvesting is a straightforward concept. It’s the process of strategically realizing capital gains and losses to minimize your tax liability.
In the US, individuals owe taxes only on realized capital gains. You must sell a stock to realize a capital gain or loss. Unrealized capital gains are not taxed.