The Setup:

You’ve probably heard a lot about tax reforms recently. How will these proposed changes impact your portfolio? What can you do to protect yourself?

The Combination and Key Points: 

On this episode of Unlocking Your Financial Future, we are going to discuss potential tax reforms and capital gains. We’ve all been hearing a lot about these potential changes in the news. So, what do you need to know to protect your portfolio?

For the average client, what is subject to change when it comes to their capital gains? If you’ve held an asset for more than 365 days that is considered a long-term gain and if you’ve held it for any amount of time less than that it is a short-term gain. A lot of people may see the news and think proposed changes that are relevant to the top 1% of earners in America may be applicable to them, but this isn’t necessarily true.

Short-term gains will probably stay consistent and anyone making $400,000 or less shouldn’t see tax increases as things stand now. However, we do want to stay vigilant against tax increases when it comes to our capital gains, especially those long-term gains.

That’s where tax-loss harvesting comes in. If you take advantage of your losses, you can protect your portfolio and you won’t have to worry about capital gain taxes. Say you bought AT&T stock a year ago for $35 dollars, today it’s around $25 to $27 dollars. In a non-qualified account, brokerage account, or irrevocable trust we are probably going to sell and lock in those losses.

Why? Well, you can use that $10,000 or so in capital losses against capital gains, for the rest of your life. All you have to do is wait 31 days and buy back into AT&T. In 18 months if that stock is up to $10,000 you won’t pay on those gains. The worst-case scenario with tax loss harvesting is that everything goes up and you end up making more money!

If you have any questions, please reach out to us at https://www.baschrock-fg.com/ or give us a call at 330-473-1060

To hear more about this strategy and other potential tax changes you can listen to the full episode or use the timestamps below to find a specific segment.

0:15 – Tax reform and capital gains

0:55 – What is subject to capital gains?

2:48 – Brokerage accounts and marketable securities

4:55 – Long term capital gains

8:05 – What are some strategies?

11:14 – Mutual funds and tax loss harvesting

14:33 – Capital gain taxes are likely to change

Key Quote: 

How do we take advantage of those losses? Well we can use those capital losses against any gains for the rest of our life

Thanks for listening to another episode of Unlocking Your Financial Future. We’ll talk to you again next week!


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