{"id":7970,"date":"2024-11-15T20:42:02","date_gmt":"2024-11-15T20:42:02","guid":{"rendered":"https:\/\/finderica.com\/why-tax-loss-harvesting-can-be-easier-with-etfs\/"},"modified":"2024-11-15T20:42:02","modified_gmt":"2024-11-15T20:42:02","slug":"why-tax-loss-harvesting-can-be-easier-with-etfs","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=7970","title":{"rendered":"Why tax-loss harvesting can be easier with ETFs"},"content":{"rendered":"
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Izusek | E+ | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Despite a strong year for the stock market, you could still be sitting on portfolio losses. But you can leverage down assets to score a tax break, experts say.<\/p>\n

The tactic, known as “tax-loss harvesting,” involves selling losing brokerage account assets to claim a loss. When you file your taxes, you can use those losses to offset portfolio gains. Once your investment losses exceed profits, you can use the excess to reduce regular income<\/a> by up to $3,000 per year.<\/p>\n

“Tax-loss harvesting is a tried and true strategy to lower investors’ tax bills,” said certified financial planner David Flores Wilson, managing partner at Sincerus Advisory in New York.\u00a0<\/p>\n<\/div>\n

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More from ETF Strategist:<\/h2>\n
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Here’s a look at other stories offering insight on ETFs for investors.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

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After offsetting $3,000 in regular income, investors can carry any additional losses forward into future years to offset capital gains or income.<\/p>\n

“Investors can benefit substantially over time” by tax-loss harvesting consistently throughout the year, Wilson said.<\/p>\n<\/div>\n

<\/a>What to know about the wash sale rule<\/h2>\n
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Tax-loss harvesting can be simple when you’re eager to offload a losing asset. But it’s tricky when you still want exposure to that asset.<\/p>\n

That’s because of guidelines from the IRS known as the “wash sale rule,” which blocks you from claiming the tax break on losses if you rebuy a “substantially identical” asset within the 30-day window before or after the sale. <\/p>\n

In other words, you can’t sell a losing asset to claim a loss and then immediately repurchase the same investment.\u00a0<\/p>\n<\/div>\n

<\/a>How exchange-traded funds can help<\/h2>\n
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While the wash sale rule is a challenge, exchange-traded funds, or ETFs, can help investors avoid trouble with the IRS, experts say.<\/p>\n

“The beauty of using ETFs for doing tax-loss harvesting … is that there are so many similar, but not identical, ETFs that could be exchanged for a losing one,” said George Gagliardi, a CFP and founder of Coromandel Wealth Strategies in Lexington, Massachusetts.\u00a0<\/p>\n

For example, many ETFs in the same sector, such as large-cap value, emerging market or small-cap growth, use the same pool of stocks with different selection criteria, he said. <\/p>\n

But ETFs with identical indexes, like the S&P 500