Hello Johnjef!
Generally speaking, tax loss harvesting can be a useful strategy for investors seeking to lower their tax bill and grow their portfolio. The basic premise involves selling investments that have declined in value to realize capital losses, which can then be used to offset capital gains. The capital losses can also potentially offset other income. After selling the investment, the proceeds can be reinvested in a similar but not identical asset to maintain exposure to the asset class. This allows the investor to maintain their strategic asset allocation while capturing the tax benefits of realizing losses. However, tax loss harvesting does come with risks and downsides that investors should consider. For example, the wash sale rule limits the ability to claim losses if a substantially identical investment is repurchased within 30 days. Additionally, transaction costs like commissions and bid-ask spreads can eat into the tax savings. Tax loss harvesting may not be suitable for all portfolios or situations, so be sure to evaluate your specific circumstances with your investment advisor.
When considering tax loss harvesting as a strategy specifically relating to REIT's this strategy can be aggressively used to offset the large capital gains that tend to be present when these investments are sold, due to the reduction in cost basis by the amount of the REIT distributions which are classified as a return of capital.
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Please feel free to reach backout with any additional questions or concerns you might have!
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Terri Lynn
