What is the harvest of tax losses?

Tax loss collection is a financial strategy intended to balance taxes that would concern capital profits obtained during the tax period. The strategy usually focuses on profits created by short -term investments, as many countries give profits from capital to these types of investment with a slightly higher rate than profits obtained by long -term investments. While the harvesting of tax losses is a functional and legal strategy in many countries, there are usually some limitations on how to use access to harvest.

To create a tax loss, it is necessary to sell short -term security with loss and effectively create the loss of capital of this investment. Capital losses that experience sale help to balance capital gains gained for another short -term investment. This strategy of harvesting tax losses will only work if capital profits and capital losses take place in the same tax period.

While the harvesting of tax losses helps minimize taxes, the process also reduces the amount of the totalh profits for a given period. As one way to minimize loss, many investors decide to purchase shares that are still associated with the company in the same general category, but not as shares sold. For example, if the shares sold were associated with a distance service provider, the investor may decide to replace shares by purchasing shares in the conference call. Both companies are considered part of the telecommunications industry, but are not similar to their nature and function.

In the event that the investor wants to retroactively sell shares that have been sold in order to create tax losses, it is important to observe the applicable laws that manage this event. Often the waiting time is before the redemption can occur and does not affect the harvesting process of tax loss. Almost in every situation, Tom must be waited for at least the entire calendar month before the start of the repurchase.

Investors should keep in mind that many countries do not store limits on the amount of capital losses that can be required against KAdrinking profits obtained in the tax period. Usually, however, there are some limits on how much loss incurred in the harvest of tax losses can be used for normal income. The husband's death during the tax period may also have an impact on how the loss of the strategy of harvesting can be applied to profits obtained in the given period. In order to understand exactly how the harvest of tax losses in the country can work, it is important to learn about all the regulations that affect business activities in this country.