OPPORTUNITIES ABOUND

We are about to say goodbye to what seems like the first ‘normal’ summer we’ve had in two years as many of us returned to vacations and being away with friends and family. For the most part much has returned in our daily lives, but without question… we have not forgotten about the market declines we have experienced in 2022. This has been a time of adjustment as we have watched interest rates and inflation on the rise, while many portfolios have retreated from their previous highs coming out of the pandemic. This has prompted many to ask us about tax loss selling.

As we enter the fall meeting season shortly, some may have options to consider from a tax loss selling perspective.  Of note, tax loss selling only applies to Non-Registered Accounts and excludes all Registered accounts (RSP, RIF and TFSA etc.) This is something typically done more towards the end of the year when we may know what capital gains you have or may incur for the year. Selling some assets as a capital loss will help you offset those gains realized during the year. Net capital gains are taxable in the year you incurred the gain, however losses incurred can also be used to carry back three years to apply against capital gains in earlier years. If you have no gains to incur for the current year, not to worry as the losses can be carried-forward indefinitely which means you can use them against future years gains. Do you have another taxable asset you may consider selling in the future (cottage etc.) – if so, this strategy could reduce some of those gains.

It is also important to note that although this could be a strategy for you, it does not mean that the investments are bad investments or we no longer believe them to be worthwhile holding. In fact, this is quite the opposite in most situations. Many accounts that have been held for a longer period of time likely have gains within them, however this is simply an opportunity for us to take advantage of the current situation by re-positioning. Each account and client situation differs – just like your plan.

Ultimately this could be something that lowers your tax bill now or in the future. There are specific rules to follow around tax loss selling and the situation needs to be applicable to your own plan and tax matters to be relevant.

Talk to us if you have any questions! We are here to help!

By Andrew Hawryluk
Wealth Advisor
Assante Financial Management Ltd.