How to get a tax benefit out of the Coronavirus market crash

The video tutorial explains tax loss harvesting, a strategy to offset capital gains by realizing losses on underperforming investments. It details the tax benefits, such as offsetting gains from various sources and carrying over unused losses. The process involves selling losing investments and reinvesting in different securities to maintain asset allocation. Common mistakes include using tax-advantaged accounts, falling into the wash sale trap, and disrupting investment strategies. Robo-advisors can automate this process, but consulting a financial advisor is recommended.

What is one of the main benefits of tax loss harvesting?

• It helps in offsetting capital gains and ordinary income.

• It allows you to increase your capital gains.

• It guarantees a profit on all investments.

• It eliminates the need for a financial advisor.

What is the first step in the process of tax loss harvesting?

• Reinvesting in the same securities.

• Realizing the loss by selling underperforming investments.

• Consulting a financial advisor.

• Ignoring capital gains.

Why should tax loss harvesting not be done in tax-advantaged retirement accounts?

• Because it can lead to a wash sale.

• Because it is illegal.

• Because losses cannot be deducted on your tax return.

• Because it increases your ordinary income.

What is a wash sale in the context of tax loss harvesting?

• Selling and buying the same security within 30 days.

• Selling securities at a profit.

• Consulting a robo-advisor.

• Reinvesting in different securities.

What should you ensure when reinvesting after tax loss harvesting?

• Invest in tax-advantaged accounts.

• Avoid consulting a financial advisor.

• Buy different securities that meet the same investment goals.

• Buy the same securities you sold.