TRANSCRIPT:

Hello and welcome back. My name is Greg Vojtanek of Fade In Financial. Today I’m talking about tax loss harvesting. So what is tax loss harvesting? In simple terms it means you’re going to purposely take a loss on an investment in order to count it against your taxes and lower your tax liability.

There are two main steps involved in tax loss harvesting. Let’s take a real life example of shares of a stock. If you own shares of a stock and it’s currently trading at a loss, but you’re a believer in that company or that stock, you can purposely take a loss on it right now.

Let’s just say it’s $1,000. So now you can take that $1,000 and, similar to a write-off, you can deduct it on your taxes. Now you just took a $1,000 deduction and you’re going to pay a little bit less in taxes this year. But in order to take that loss, you cannot turn around and buy that stock the same day. In fact, you can’t buy that stock for another 31 days. So what do you do?

Well then the second part is, you can turn around and buy a very similar stock or fund that’s going to act just like the one you sold. If you do that, then you’re allowed to take that $1,000 loss. You’re happy because you have a very similar stock or fund that acts very much like the one you just sold. So over time you believe it’s going to act very similar.

So that’s basically how tax loss harvesting works. There’s more to it than that but that’s the simplest way to explain it. Seek a tax and financial professional before making decisions. But I do hope you found this helpful. Always do what is best and right for you. Thanks for watching.