10 Tips for Harvesting Investment Losses

In this episode of Motley Fool Hidden Gems Investing, Robert Brokamp, a personal finance expert, discusses tax-loss harvesting. He explains that investors can turn investment losses into tax benefits by selling losing investments in non-retirement accounts. With the market near all-time highs, many stocks have lost value, including around 200 in the S&P 500 and 40 in the Nasdaq-100. Brokamp provides 10 tips for maximizing losses and managing gains.

Tip No. 1: Tax loss selling isn't limited to stocks. Any investment, such as bonds, ETFs, or options contracts, that has decreased in value can be harvested for tax benefits. The speaker emphasizes the importance of researching crypto losses, as the rules can be different.

Tip No. 2: Match short-term and long-term gains and losses. When filing taxes, categorize investments as short-term (held for a year or less) or long-term (held for more than a year). Offset short-term gains with short-term losses, and long-term gains with long-term losses. Unused losses can be carried forward to subsequent years, and a $3,000 deduction is allowed per year ($1,500 if married and filing separately).

Tip No. 3: Sell now, but wait before buying back. If you sell an investment to take a loss, don't repurchase it within 30 days. Otherwise, it's considered a wash sale and the loss cannot be claimed on taxes. The 30-day clock starts the day after the sale, and it's important to note that this applies to calendar days, not trading days.