Have you ever heard of tax loss investing? If you haven’t, don’t worry. We’ve got you covered.
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Shane Gornik, financial advisor with Forefront Financial Planning, joined WBBM Newsradio’s Rob Hart this week on the Noon Business Hour to explain the strategy. Generally, it refers to “selling nonprofitable investments at a loss to offset or reduce capital gains taxes incurred from investments sold for a profit,” as explained by NerdWallet.
“Tax loss harvesting comes into play when it is a non-retirement account,” said Gornik. “So, it is not money that’s going to be in an IRA or a Roth [savings accounts], but it’s going to be regular investment money.”
Investors have a loss and sell out of that position prior to the end of the year will likely have some positive results. These can come in the form of a tax break offsetting any other capital gains incurred during the year. Gornik noted that the window for moving on this approach is closing fast.
“It’s something that has to happen by the end of the year,” he said. “It’s a hard, fast deadline,” of Dec. 31. Gornik recommends speaking with a financial advisor about potential tax loss investing plans ahead of the New Year.
That’s just one strategy that Hart and Gornik discussed, from taking a look at 401k contributions to cleaning up subscription fees and meeting with tax preparers. Getting these done before holiday parties get into full swing might be a good idea.
“A lot of people intend to do it after the first of the year and holidays come, people travel, life happens and they forget,” Gornik said. “And so, getting it done now, kind of the calm before the storm is a great time to get it done now.”