Financial advisors often suggest to their clients to "harvest tax lossess" - sell those stocks or funds that have lost money. It is true that losses can offset gains and also that up to $3,000 in losses can be offset against regular income. Nice.
As Dan Moisand in a February 2010 issue of Financial-Planning.com reminds us, though, "...the process of harvesting losses...reset[s]...cost basis to a much lower amount. [You], therefore...increased future taxable gains..."
Since the next purchase you make, assuming it is a successful investment and has a gain when later sold, resets the cost basis, then over a studied 10-year period you may find, as he did, that taxes paid on future investments offset, in part, the losses supposedly "harvested".
Watch out for phrases like "capture the equity" in your house and "harvest your losses". They are not the panacea they appear to be at times.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.