How To Turn Stock Market Volatility Into Lower Taxes
Share this @internewscast.com


If you follow the stock market, you know that markets have been highly volatile in 2022. You have likely seen the value of some of your investments drop below what you have paid for them. This may be a great time to revisit tax-loss harvesting and use the stock market drop to help you lower your tax bill for 2022.

The Limits of Tax-Loss Harvesting

Investment gains and losses will be netted against each other to determine your taxable investment gains. Capital gains are split into short term (shares held less than a year) and long term (shares held longer than a year). If you have more short-term losses than gains, you can deduct up to $3,000 against your regular income. Remaining losses beyond this amount can be carried forward to future years.

Tax-loss harvesting rules will vary at the state level. California taxes capital gains as regular income. So as a Los Angeles Financial Planner, tax-loss harvesting can be extremely valuable for my California tax-planning clients. Talk with your tax-planning financial planner and tax person to see how tax-loss harvesting could benefit you by helping lower your state taxes on capital gains.

You Need to Know About the Wash Sale Rules

The wash sale rule prohibits investors from selling an investment for less and then rebuying the same or “substantially identical” investment within 30 days before or after the sale for a loss. If you don’t follow the wash sale rules, you can lose the tax benefits of your tax-loss harvesting sale.

Tax-Loss Harvesting Can Be Done Throughout the Year

Many people think about tax-loss harvesting at year’s end. However, you can make tax-loss harvesting transactions anytime during the year. The tax benefits of tax-loss harvesting are typically the most valuable when there is a significant drop in the stock market (like we are seeing now). Hopefully, you are working with an amazing financial advisor who offers proactive tax planning. You don’t have to think about it; you will just realize the tax benefits when you file your taxes next year.

MORE FROM FORBES12 Reasons You Won’t Be A Millionaire

Shouldn’t You Buy Stocks Low and Sell High?

In a perfect world, every investment you make would result in you buying it at a low price and eventually selling it at a higher price. Even an investment portfolio that has performed amazingly well over the long term can have some losers. Or, perhaps, some of your purchases are worth a bit less than what you paid, even if the investment is up over the time you began buying shares.

Tax-loss harvesting has been around and used by the ultra-wealthy for quite some time. However, it recently came to the attention of a wider swath of stock investors who are not super-wealthy. Technology and reduced (or eliminated) trading costs have made the tax-minimization benefits of tax-loss harvesting easier to implement and much less time-consuming and costly. Tax-loss harvesting can help boost your net after-tax investment returns without taking on more risk. Who doesn’t love saving money on taxes?

Share this @internewscast.com
You May Also Like

Tesla Vehicle Deliveries Tumble After China Factory Shutdown

Tesla vehicle deliveries fell quarter-over-quarter for the first time in more than…

Accelerate Growth by Seeing Your Business Through Your Clients’ Eyes

Opinions expressed by Entrepreneur contributors are their own. At this point in…

Biden Has 3 Major Decisions

President Joe Biden (Photo by Jim Bennett/FilmMagic) FilmMagic President Joe Biden has…

Biden Framework Could Look Like This

President Joe Biden (Photo by Denis Doyle/Getty Images) Getty Images President Joe…

China’s Covid Isolation Spurs Beijing-Based Development Bank to Open Overseas Office

BEIJING—The China-backed Asian Infrastructure Investment Bank is set to open its first…

Singapore crypto exchange freezes withdrawals

Crypto contagion claims another casualty. In a statement, Singapore-based crypto exchange Vauld has…

Bitcoin ‘tourists’ have been purged, only hodlers remain: Glassnode

So-called “market tourists” are fleeing from Bitcoin (BTC), leaving only long-term investors…

June gloom takes on a new meaning in another 2022 down month

The market cap of Bitcoin (BTC) dropped another 33% in June, which…