The US market has gained over 25% this year, making it an unlikely environment for tax-loss selling. However, investing in non-US stocks can create opportunities to realize losses that can offset gains elsewhere.
To benefit from tax-loss selling, you need taxable accounts and holdings trading below cost basis. There are two main methods for determining cost basis: the specific share identification method and the average cost basis election. The former provides more opportunities but requires selecting a different cost-basis election before selling.
If you sell securities at a loss, it can help offset gains in your portfolio. Capital losses can be used to offset up to $3,000 in ordinary income, with unused losses carrying forward indefinitely. As the year ends, consider tax-loss candidates in:
– Long-term bond funds and ETFs: Many have struggled over the past year and three years, making them ripe for selling.
– Intermediate-term bonds: While losses haven’t been as deep, a large position size can still result in significant losses if not managed properly.
Tax-loss selling can also improve your total portfolio’s asset location by moving fixed-income holdings to tax-sheltered accounts. With yields surging, it’s essential to be smart about asset placement now.
Source: https://finance.yahoo.com/news/could-benefit-tax-loss-selling-160138110.html