Who says this is a “supposedly good year for the markets?”
Some of your investments may have lost money this year. Many of your investments may have gains. If you have the type of account for which you have to pay taxes on some, or all, of your gains every year, then we may have the opportunity to “harvest” the investments with losses for tax purposes. Talk to your personal wealth manager about how you may benefit from this service!
Here is an example.
Let’s say we invested in a mutual fund that is invested in foreign companies. This fund, like many international investments, may be worth less today than it was when we purchased it. Let’s say we bought 1,000 shares for $26 and today the price per share is worth $20. In our example, this is a $6,000 unrealized loss in your portfolio.
Let’s say that in another part of your portfolio you have $10,000 of realized gains. This means, at some time during this year, we’ve sold investments that total $10,000 of profit. In this example, if you’re in the 35% marginal tax bracket, you will have to pay $3,500 in taxes.
Here’s what we do that makes us a unique financial planning firm. Your wealth manager may identify a tax loss opportunity in your portfolio and give you a call. After discussing your tax situation, your wealth manager may sell the international investment, realizing $6,000 of losses and offsetting 60% of your $10,000 gains. In our example, this strategy could potentially save you $2,100 in taxes you otherwise would have paid.
We will be doing tax harvesting over the next few weeks. If your wealth manager calls you (and/or your CPA) in December, please be sure to take the call! Oh, and mention this to your CPA who may not be familiar with tax harvesting. We are happy to discuss the details directly with him or her. As always, give us a ring and/or share our number with anyone who may be interested.