HALBERT HARGROVE

By Brian Spinelli, CFP®, AIF®, Chair of Investment Committee/Senior Wealth Advisor

If you have a taxable account with HH, this message is particularly important.

As you know, over the course of the past few weeks, the global stock markets have witnessed significant declines – although we’ve had some reprieve in the last few days.

Other than taking advantage of buying opportunities, there are few silver linings to stock declines but tax loss harvesting is one of them. This strategy is part of HH’s ongoing process in managing taxable accounts, which takes advantage of declines to help clients offset future tax liabilities.

We wrote about tax loss harvesting in a commentary on volatile markets that we shared in the first quarter of 2018 (this probably seems like ages ago!). It’s a practice we’ve used in managing portfolios for decades.

If you’re unfamiliar with this strategy, here’s the gist of it:

  • If securities are sold at a gain, the owners of taxable accounts have annual tax liabilities; they owe the taxes on those gains next tax season. In environments like we’re in now, positions in portfolios are likely to have losses, but these losses aren’t booked, or “realized” unless they’re sold.
  • You can choose to sit on losses and wait for a recovery, or you can realize a loss, and in its place buy a similar investment, a proxy. This will enable you to capture, or “harvest” the loss, but catch some of the upside with your proxy if markets recover in that interim.
  • Investors must stay out of the original investment for 30 days (required by the IRS) in order to realize the loss. Once the 30 days has passed, you can return to the original investment. You can use these harvested losses to offset future realized capital gains.

We know that the declines in stocks and heightened volatility that we’ve all been experiencing is no easy thing to stomach. But here at HH, we’re doing all we can within our discipline to mitigate the risks and take advantage of the opportunities this environment presents.

We’re not immune to bear markets, but we’re laser-focused on results. With tax loss harvesting, our clients can remain invested while reducing future tax liabilities.

As always, please be in touch with any questions you might have about how we’re implementing this practice on your behalf.

For more information or questions, please contact Halbert Hargrove at hhteam@halberthargrove.com