#7 Selling Losing Stocks to Reduce Capital Gains

Stock price increases have been few, and 2022 has been a difficult year for the stock market, with the S&P 500 index down more than 20%. One benefit of a bearish trend is that it presents a fantastic opportunity to undertake “tax loss harvesting” because of all those possible stock losses.

The tax-saving method involves recovering losses, or selling stocks and other assets that have depreciated in value, to balance out any potential capital gains. You might sell your stocks and deduct the financial loss from your capital gains if, for instance, in 2022 you sold real estate for a profit of $25,000 but invested heavily in a stock that was in trouble, such as Netflix or Meta. If you have stock losses of $25,000, you can use them to offset your real estate sale profit of $25,000 and avoid paying any taxes.

Any income you receive from the sale of assets, including stocks, property investments, vehicles, furniture, or other tangible goods, is considered a capital gain. However, recognizing losses and offsetting gains requires that you sell the assets in question.

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