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Tax Loss Harvesting - What Is It?

Tax Loss Harvesting - What Is It?

October 29, 2022

In our ag-based communities we think of harvest as a season. A time when the trees begin to look bare and the dust from the fields fill the air. A time when there is a sense of unspoken urgency to gather the crop before the first snowfall, all in hopes for a high yield and bountiful return. One may not realize that harvest is not only a season. It not only applies to farming but can be a common tax strategy used within one’s investment portfolio.

What does it mean? Tax Loss Harvesting is when an investor sells a position within their non-qualified (taxable or non-retirement) account at an overall loss. This capital loss on their investment, whether considered short-term or long-term, can help offset taxes of a similar type. Once the short- or long-term capital gains taxes are offset, additional losses up to $3,000 per year, can be deducted from your ordinary income. Still showing a capital loss? It can be carried over into future tax years.

Why now? This has been a common topic as of late and an opportune strategy to consider during down markets like we have experienced this year. One might even consider selling their current investment as on opportunity to capitalize on a loss, but then buy an investment of a similar type to remain active in the market in hopes of catching a market rebound in the future.

Ultimately this strategy should be considered as an opportunity but should not hinder one’s long-term investment goals. It is also important to keep in mind that everyone’s situation is different. If you think this strategy may benefit you, please consult with your financial advisor or tax professional.

Pictured: Carly with her husband Justin and their two daughters, Jaedyn and Jozi, at their family farm.