Read This Before You Harvest Your Tax Losses
Stock markets have risen dramatically in 2017, extending the bull market into a ninth straight year. Yet those who have diversified investment portfolios often own at least one or two stocks that have lost money, and that can open up an opportunity to use a key tax-saving strategy known as tax-loss harvesting. Before you take steps to use this strategy, it's important to understand the details so that you avoid costly mistakes.
When you sell an investment, you'll typically recognize a capital gain or loss, depending on whether it has gone up or down in value. If you sell more than one investment, then you're allowed to offset gains on one with losses on the other to come up with a net gain or loss. If you have more losses than gains, you're also allowed to claim up to $3,000 in losses against other types of income. Any unused loss in a given year gets carried forward to future years.
In order to claim a tax loss on your 2017 tax return, you have to sell your losing investments by Dec. 31. After that, you won't be able to take a loss until 2018.
Source: Fool.com
