I’d like to continue this video series which is a Summer Financial To-Do List.
And today, I want to discuss Planning for Future Tax Seasons: It’s worth considering tax-loss harvesting and proper asset location strategies to potentially help with future taxes.
Tax-loss harvesting involves selling securities at a loss to help offset taxes owed from capital gains in taxable investment accounts. Even though the market has appreciated since last year, there still may be legacy losses that have been sitting in your portfolio for years. It may be time to put these losses to good use by using them to offset gains and then reposition the cash into more sensible investments.
Additionally, spending time to evaluate your “asset location” will also help in tax efficiency. Asset location (not to be confused with asset allocation) is a strategy where investors intentionally choose where they park their investments to maximize their tax benefit. This includes putting more tax inefficient investments into tax advantaged accounts, like a 401(k), 403(b), 529 college savings accounts, and HSAs, to name just a few. Ensuring that your investments are in the appropriate accounts can save you a lot of money, come tax time.