Weekend Reading: Profiting from Losses

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
Weekend reading tax loss harvesting tips Weekend reading tax loss harvesting tips
Weekend Reading

You can employ the power of tax-loss harvesting in times of volatility to make up for prior year losses. This strategy works by selling underperforming investments, then utilizing that loss to reduce taxable gains, potentially offsetting up to $3,000 of income.


Mind the rules: Leveraging this move isn’t foolproof, however. There are a few stipulations to be aware of before you move forward. Three things in particular to be mindful of include:

📌 Violating the wash-sale rule: This prohibits you from selling an investment for a loss then replacing it with the same or "substantially identical" investment 30 days before or after the sale. To steer clear, check for dividends before selling in every account.

📌 Buying the dividend: When you purchase a stock or fund before the ex-dividend date, you owe taxes on the dividend paid. To avoid this payment, remember to check the ex-dividend date and if “a dividend is near, consider waiting until after the ex-dividend date.”

📌 Breaking tax thresholds: Capital gains can push you into a higher marginal tax bracket, so be sure to monitor how close you are to reaching thresholds.

You have tax strategies at your disposal to implement year-round. The first step is understanding what’s in your tool box, and the second is knowing the rules.