Silver Linings: 2022 is a Great Year to Book Losses

Well, there is always a silver lining out there and when it comes to investments 2022 provided plenty of opportunities to at least book some losses for tax purposes.

Tax Loss Harvesting

As defined on investopedia....

• Tax-loss harvesting (TLH) is a strategy to lower current taxes paid to the U.S. federal government by deliberately selling an investment at a loss—i.e., deliberately taking a capital loss—in order to use that loss to offset taxes owed on an investment sold at a profit—i.e., a capital gain—or even taxes owed on personal income

To take losses or not...

This is a personal decisions for everyone based in their scenario. For me, I'm blessed to have some decent gains for real estate sales, but they are taxable so it is atleast worth taking a look at some loss harvesting, especially when there is plenty to go around in the crypto and stock space with this year's bear market.

One day left in the year to make those decisions. The beauty with crypto is the is not currently a wash sale rule, so in theory you can sell your crypto at a loss and immediately buy it back.

By doing this, you can book the tax loss now but you also reset the entry price of the crypto you sold and bought back. Thus, when you sell that crypto again your cost basis will be the new lower price. It may be just kicking the can down the road but can make sense depending on your overall taxable income in a given year.

This is why having a good accountant makes sense so you can build out the appropriate tax strategy with them. My accountant is solid if anyone needs one.

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