Financial Planning Checklist: What Issues Should I Consider When Harvesting Capital Losses?

Tax-loss harvesting is a popular strategy, but it’s not always clear whether it’s the right strategy for your needs.

What is Tax-Loss Harvesting?

Tax-loss harvesting is when you sell an investment you own that’s now worth less than what you purchased it for. You can then use that loss to reduce your capital gains on other assets, or possibly take a reduction on your tax return.

With markets being down so far this year, there’s been a spotlight on this strategy. The checklist below covers some key issues to consider when you’re thinking of implementing a tax-loss harvesting strategy, such as:

• The effect harvesting losses may have on your overall portfolio goals.
• Some common pitfalls and rules to be aware of when harvesting losses.
• The potential tax benefits and consequences that may arise.
• How long-term goals may be affected by tax-loss harvesting.