Heading Into Peak Harvesting Season

The weather turns cooler, the days are getting shorter, and stocks are prime for harvesting.

As we look ahead at the fourth quarter and year-end, we see the extended tax 2020 deadline (October 15th) approaching and our shortening timeline to make strategic tax moves for 2021. Needless to say, taxes are on a lot of people’s minds.

And, with the markets hovering at all-time highs, it’s possible you’ve sold stock holdings and captured some gains during this calendar year, which will be subject to the capital gains tax rate (up to 20% at the time of publishing).

We believe now is a great time to harvest losses.

Tax loss harvesting is the concept of selling specific investment holdings at a loss (down from your strike price or your purchase price) to offset gains that you’ve captured by selling other investment holdings at a profit.

Now, one can’t simply sell just any shares of a specific holding. Each time we harvest losses for clients, we must look at each individual tax lot; meaning, we look at each time our client has purchased shares of a specific holding. Each tax lot for a specific holding records the date of the purchase and sale, the cost basis and sale price.

That means, some shares of a specific holding may be sold at a greater loss than others. In fact, some shares might be sold at a gain resulting in an even greater tax consequence if sold unintentionally. It’s important to be thoughtful and strategic when tax loss harvesting.

This type of strategic thoughtfulness can greatly decrease the amount of capital gains our clients owe each year. If you’re wondering how to off-set the gains you’ve captured this year, please reach out to AskFreedom@freedomfamilyoffice.com