2020 Year-End Tax Tips
As we all anticipate putting 2020 behind us and starting fresh in the new year, here are some year-end tax tips to consider that may help to lighten your tax bill.
Tax Loss Selling
The last day for tax loss selling this year is December 29, 2020.
Investors should consider selling stocks or bonds before Dec. 29 if doing so will generate a taxable loss, as these losses can be used to offset capital gains (note that this advice only applies to non-registered accounts as gains realized in registered accounts are not taxable). Such tax loss ‘harvesting’ can be a useful tool for minimizing tax burdens as realized losses for the year can applied against realized gains from 2020 or prior years to reduce taxes owing. If you have no current or past gains to apply losses against, you can also carry them forward to offset future gains.
Bridgeport consistently makes use of tax loss selling within its pooled funds by strategically selling individual investments within the funds to reduce any taxable income that ends up on investor tax slips distributed at the end of the year. This helps to reduce taxes paid by our clients.
Of course, investors always need to be aware of the CRA’s ‘superficial loss rule’. If a security is sold at a loss and subsequently repurchased in the following 30 days, the loss will be considered void and may not be used to offset gains.
Further, investors are cautioned not to “let the tax tail wag the investment dog”. Even the highest quality investments suffer setbacks, some