Do you own stocks, bonds, mutual funds, or other marketable securities? Are you looking to get a tax advantage from selling money losing investments? Tax-loss selling may just be the tax strategy that is right for you!
When owning stocks, shares, and other types of investments, it is common to accrue losses as the market values of securities fluctuate. An accrued loss occurs when you own investments that have a market value today that is less than what you initially paid for them. These accrued losses become a tax advantage when realized, in other words when you sell them. Realized losses can be used to offset capital gains in your portfolio. This strategy is known as Tax-loss selling. It is especially important to realize these losses at the end of the year because if they go unrealized, you will have to pay taxes on the capital gains that you have in your portfolio.
The useful thing about capital losses is that capital losses that cannot be used in the current year may be used to offset capital gains incurred up to three years prior or it can be carried forward indefinitely to offset any future capital gains. However, in order for capital losses to be available immediately in the current year, the settlement must take place no later than December 24th of that year, so that it may be processed before the end of the year. It is important to note that if shares are purchased in a foreign currency, the gain or loss may be larger than anticipated once the exchange rate is taken into account.
So Here’s the Tip:
By using this simple tax strategy, you can strategically offset any realized capital gains.
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.