As the end of the calendar year approaches, so too do discussions regarding any unrealized gains or losses of substance sitting within taxable accounts. It is probably a safe assumption that you prefer to pay less in taxes whenever possible; and there are a few simple strategies that can be applied within the portfolio to help in that endeavor. “Tax Loss Harvesting” is among them, and while it is not exactly an advanced accounting strategy, it is an effective way to both offset gains and rid the portfolio of laggard positions before the calendar flips to 2018.
In some years, finding losses to harvest is easier than others. 2017 has been a largely positive year, yet there are still several individual names in the red. Take the S&P 500 Index SPX as a starting point. Although the index is up more than 16%, 145 of the 505 components are carrying losses year-to-date (through 11/24). Furthermore, 85 of those stocks are down 10% or more. Losses from these positions may be used to off-set some of the gains already taken in the calendar year, or can be “carried forward” in many cases. The harvesting of losses is a fairly straight-forward approach, which can be combined with the practical portfolio review measure of weeding out technically weak holdings.
Be aware of the calendar. Any stock sold for tax loss purposes cannot be repurchases for 31 days or you will nullify your loss for income tax purposes. Consider using exchange traded funds during that time period to maintain your exposure to the markets. As always, a meeting or phone call with your CPA before the new year may result in some tax saving ideas as well.
** This article was written and provided to you by Charles Tumlin, Managing Director, TLS Wealth Management of Raymond James.
Charles Tumlin is a Financial Advisor with Raymond James & Associates, Inc., Member New York Stock Exchange/SIPC located at 2015 Boundary Street, Suite 220, Beaufort SC 29902.
He can be contacted at 843-379-6100 or charles.tumlin@raymondjames.comor visit our website at: www.tlswealthmanagement.com
Opinions expressed in this article are those of the author and are not necessarily those of Raymond James. Raymond James is not affiliated with nor endorses the author or his firm. All opinions are as of this date and are subject to change without notice.
Raymond James does not provide tax services. Please discuss these matters with the appropriate professional. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.
Investors should consider the investment objectives, risks, charges and expenses of an exchange traded product carefully before investing. The prospectus contains this and other information and should be read carefully before investing. The prospectus is available from your investment professional.
