If you’re an individual stock investor, there’s a hidden treasure waiting for you in the form of tax-loss selling! Even if your overall portfolio is performing well, chances are there's a stock or two that hasn’t fared as well since you bought it. In fact, as of mid-November, over 1,100 US stocks with market capitalizations exceeding $1 billion reported losses of 10% or more this year alone. Furthermore, a striking 1,200 US companies with similar market caps had suffered a loss of at least 10% over the past three years. This could be your chance to turn those losses into a tax benefit!

Your Next Moves to Maximize Tax Benefits

When it comes to tax-loss selling, the rule of thumb is simple: if you sell a security at a loss, you can immediately purchase something similar, as long as the new investment is not deemed 'substantially identical' by the IRS. For instance, if you swap out an actively managed fund for an index fund or an ETF, you're in the clear! However, be cautious; exchanging one index fund for another that tracks the same index could lead to a wash-sale—rendering the loss disallowed by the IRS.

An even better approach? Wait 30 days after selling your losing investment before buying it back. This way, you can still claim the loss and reinvest in what you thought was a lost cause.

Additionally, tax-loss selling is not just a standalone strategy; consider integrating it with a broader portfolio review. This review can help identify other investments that might be underperforming or re-evaluate your overall strategy.

Don't Leave Money on the Table!

With tax season around the corner, many investors are scrambling to figure out how to reduce their taxable income. Tax-loss harvesting provides a powerful tool to offset capital gains and even regular income, making it a must-know strategy for savvy investors. Whether you're looking to clean up your portfolio or gain some financial breathing room, don't overlook the benefits these strategies can offer.

Remember—timing is everything! Make sure you’re well-informed before making investment decisions. Ready to dive deeper into personal finance tips and strategies? Stay tuned, and equip yourself with the knowledge to optimize your investments all year round!