The problem with doing early tax-loss harvesting is that investors may not know what their taxable capital gains this year will be
, he adds. Capital losses must offset gains in the current year and then can be applied against gains from the prior three years.
When investing in foreign securities, investors also need to be mindful of using the exchange rate at the time they were purchased and sold to calculate any gains or losses, he says. Otherwise, “what might look like a loss could actually turn out to be a gain.” Although one strategy is to take a loss and then invest in a similar but not identical security within 30 days to take advantage of a potential rebound, investors need to be careful, he adds.
When taking the losses around December, investors can potentially take advantage of the so-called January effect when markets often rally at the start of the new year, he says.
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