{"id":2997,"date":"2015-12-04T14:32:50","date_gmt":"2015-12-04T22:32:50","guid":{"rendered":"http:\/\/blog.huddlestontaxcpas.com\/?p=1381"},"modified":"2015-12-04T14:32:50","modified_gmt":"2015-12-04T22:32:50","slug":"tax-loss-harvesting-explained","status":"publish","type":"post","link":"https:\/\/huddlestontaxcpas.com\/blog\/tax-loss-harvesting-explained\/","title":{"rendered":"Tax Loss Harvesting Explained"},"content":{"rendered":"<p>Tax loss harvesting is a tax reduction trick designed to reduce the amount you pay to Uncle Sam. It can be used quite regularly and many investors use it to either postpone or to reduce what they have to pay altogether. Let\u2019s take a look at what tax harvesting is.<a href=\"http:\/\/blog.huddlestontaxcpas.com\/wp-content\/uploads\/2015\/12\/TaxLoss.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-1382 alignright\" src=\"http:\/\/blog.huddlestontaxcpas.com\/wp-content\/uploads\/2015\/12\/TaxLoss-300x144.jpg\" alt=\"TaxLoss\" width=\"300\" height=\"144\" \/><\/a><\/p>\n<p><strong>The Principle<\/strong><\/p>\n<p>The principle of tax loss harvesting is to intentionally sell an investment when it\u2019s in a losing position. This shows up as a loss on your balance sheet. Some investors will even do this the day before the financial year ends.<\/p>\n<p>Even if you\u2019ve had a profitable year, this will make the year seem much less profitable, or even make it show up as a bad year.<\/p>\n<p><strong>The Legality Issue<\/strong><\/p>\n<p>It\u2019s certainly not in the spirit of the tax code, but there\u2019s nothing wrong with it. An investor can sell their holdings at any time for any reason they see fit. You won\u2019t be getting any ominous knocks on\u00a0your door should you decide to employ this strategy.<\/p>\n<p><strong>Concrete Example<\/strong><\/p>\n<p>Let\u2019s say an investor has a $10,000 holding. They may decide to sell this holding for $9,000 at a time where it would be advantageous for tax reasons. Now their accounts show a $1,000 loss. Capitals gains are charged based on profits, so the investor pays less tax.<\/p>\n<p><strong>Beware the Risks<\/strong><\/p>\n<p>It can go wrong if you don\u2019t react in the right way afterwards. For example, you may want to repurchase the asset, but if someone else has jumped in ahead of you that loss on your balance sheet could turn into a long-term loss.<\/p>\n<p>As you can see, employing tax loss harvesting successfully requires some forethought on your part.<\/p>\n<p>Image credit: <a href=\"https:\/\/www.flickr.com\/photos\/alancleaver\/\">Alan Cleaver<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Tax loss harvesting is a tax reduction trick designed to reduce the amount you pay to Uncle Sam. It can be used quite regularly and many investors use it to either postpone or to reduce what they have to pay altogether. Let\u2019s take a look at what tax harvesting is. The Principle The principle of [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[20],"tags":[],"class_list":{"0":"post-2997","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-taxes","7":"entry"},"_links":{"self":[{"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/posts\/2997","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/comments?post=2997"}],"version-history":[{"count":0,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/posts\/2997\/revisions"}],"wp:attachment":[{"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/media?parent=2997"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/categories?post=2997"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/tags?post=2997"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}