(Princeton, NJ, APRIL 25, 2022) — After years of few if any unrealized losses in their portfolios, investors may be interested in tax loss selling.
This involves the selling of investments in taxable brokerage accounts that have an unrealized loss. By selling them, the loss becomes realized and can be used to offset capital gains in the current year (If the losses exceed the gains in a current year then up to $3,000 of the amount that exceeds the gains can be deducted against ordinary income.) Any amounts over and above that can be carried forward to a future year.
Q1 2022 hedge fund letters, conferences and more
“We look for opportunities to do this for clients annually,” says Howard Hook, CFP, CPA, with EKS Associates in Princeton, NJ. “However, for many clients, years and years of strong stock market performance resulted in few if any unrealized losses in their portfolios, even with the recent stock market downturn.”
Opportunities In Tax Loss Selling
Several new opportunities have recently presented themselves and clients in the following situations may have losses which can be realized and utilized against current and future gains:
- Bond funds have been hammered this year – as of Friday, the aggregate bond market is down 9.4%. This creates an opportunity for those holding bond funds to realize losses.
- Clients with large capital gain distributions from stock market mutual funds in the last quarter of 2021 that they chose to reinvest have some opportunities to sell a portion of their stock market funds and realize short-term losses.
According to Hook, there are some traps to be aware of when making tax loss sales which both advisors and investors need to be aware of. Also, many only look at tax planning at the end of the calendar year when now is a good time to review and implement – if the markets turn around, then year-end may be too late.
