Tomorrow, whether you celebrate “all hallows eve” or not, is a great time for children to have fun and let their imaginations run wild. Hopefully, it is safe for everyone! Most of today’s youth don’t know that in the earlier days of our country “Halloween” was much more raw and “Trick or Treat” was more of a question than it is now. If the homeowner didn’t deliver a treat they could experience a trick such as eggs being thrown at their house or other harmful mischief that only an adolescent could dismiss as OK. Now, just 9 weeks away from the end of the fiscal year, you need to help your clients understand that the IRS has many “Trick or Treat” outcomes, such as line 13 of the 1040, and most investors get the trick instead of the treat.
What are we talking about? Tax Lost and/or Tax Gain harvesting.
Advisors often complain that from Thanksgiving to Christmas it is more difficult to get clients and prospective clients to meet with them as the holidays take precedence. Those same clients in February, March and April are complaining to their Advisors about their Tax Bill. Now is the time to schedule a mandatory Tax Harvesting meeting with all of your clients and prospects, and yes during the Holiday season, as it must be done before the end of the year, and the holidays often remove productivity and days, so time is of the essence! That urgency should help fill the advisor’s calendar as the Tax message carries slightly more weight than the Holidays in most peoples’ minds.
Gains that have been taken during the year can be offset by selling losers, and there are many strategies for not losing positive exposure of stock or bonds sold, such as weighted ETFs in the same sectors as the stock itself.
Harvesting Gains is often not even thought about by Advisors, which is a huge hole in our credibility as an industry (shame on us) and is especially brilliant for those clients who, because of the choice to own annuities, or because of their wealth being in pre-tax accounts, have very low income tax rates and can actually sell stocks now and re-buy them 3 seconds later to purposefully step up the cost basis; but even after “causing a reportable gain” on their own tax return, still pay zero additional tax, as the capital gains tax rate is still zero for people under the 15% tax rate.
How do you know who is who, and if they should make these moves???
By seeing them ALL, with all of their year to date income details, and doing “Tax What-Ifs” to determine who should sell and take a loss and who should sell to take a gain; and WHY!
You will be very busy if you adopt this theory with everyone in your database, client or not: “Here is your mandatory Tax Planning time and date between Thanksgiving and Christmas.”
You`re Welcome.
The Tax What-If Doctor 😉