Taxes alone should not drive investment decisions.

Tax Planning with Harvesting Losses

Tax-loss harvesting is a technique for realizing capital losses in non-registered accounts to offset a capital gains tax liability.

Taxes alone should not drive investment decisions. But harvesting losses made in concert with an overall investment plan can help reduce your tax bill. It is possible to carry unused capital losses back into the previous three tax years and carry them forward indefinitely. Smoothing capital gains over multiple years can result in considerable tax advantages. When it comes to tax strategies, it is critical to keep in mind that circumstances vary from individual to individual.

Harvesting Strategies at SANDSTONE

Harvesting strategies can allow you to maintain exposure to a particular stock or sector while tuning losses into tax advantages. Strategies utilized at SANDSTONE include:

  • Sell the security and rebalance/redeploy funds
  • Buy a call option and sell the underlying security triggering a taxable event while giving you the right to purchase the stock back by a set date and price in the future
  • Sell the security and buy an ETF with similar exposure (can even hold the same security)

Wash-Sale Rule

A wash-sale is buying substantially the identical security within 30 days before or after selling the security at a loss. If a wash-sale is triggered, the tax-loss becomes artificial and void.

Bottom line

Tax-loss harvesting is an essential part of overall investment management for portfolio growth and minimizing your tax bill. As discretionary investment managers, we continually manage capital gains throughout the year, utilizing harvesting strategies where applicable.