Knowing how to conduct Tax Loss Harvesting is important for tax reasons.
Also, it balances out the desire we have to ‘get back to even’, meaning the amount of money we spent to buy an asset.
Tax Loss Harvesting
Being able to refute the justification of holding onto an asset so it ‘gets back to even’ comes in the form of Tax Loss Harvesting.
If you have Loss Aversion or Sunk Cost Fallacy then Tax Loss Harvesting can offset any ill feeling you may have over selling at a loss.
Alot of what we do with money can be psychological.
When we sell at a loss, that’s no fun.
Loss Offset
But being able to offset that loss against any earlier recognized capital gains during the year offsets the feeling of the loss.
It also can provide a psychological boost just knowing you cut yourself free from an investment that has been lagging and just doesn’t make sense to own anymore.
If you decide to do it, you have until the end of the tax year.
If you change your mind later and want to, after all, own the security, well you can do that too.
Wash Sale Period
Just make sure you wait 31 days to avoid the Wash Sale Period and thus don’t negate the benefit derived from Tax Loss Harvesting.
Next Step
Ready to take the next step and work with a fee-only CFP? Reach out to schedule a Discovery Meeting to learn more.