Maximizing Returns, Minimizing Taxes: The Power of Tax Loss Harvesting
As a savvy investor, you know the importance of maximizing returns while minimizing taxes. Enter: tax loss harvesting. This powerful strategy allows you to offset capital gains by selling investments that have decreased in value. But here's the catch: it can only be done in taxable accounts, not tax-advantaged accounts like IRAs or 401(k)s. Why? Because in these accounts, gains and losses aren't taxed until withdrawal, making tax loss harvesting ineffective. But don't worry, there are other ways to manage taxes in tax-advantaged accounts, like Roth conversions and recharacterizations, that you should consider when planning for retirement savings. In short, tax loss harvesting is a smart way to minimize your tax bill in taxable accounts.