Year-end tax planning season is here. The up-and-down financial markets this year may provide you the opportunity to harvest your losses. This tried-and-true tax strategy may be an option if you’ve realized adjusted net capital gains and are now facing a high tax bill as a result.
To soften the tax blow, review your portfolio to see if there are any securities you can sell at a loss to offset the gains. If you end up with a net capital loss, you can use it to offset up to $3,000 in ordinary income. However, beware of the wash sale rule. It bans the deduction of a loss when you acquire “substantially identical” investments within 30 days before or after the sale date.
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