Smart Tax Strategies to Help You Build Wealth
When it comes to managing your money, every little bit counts—especially at tax time. One of the most effective, but often overlooked, ways to reduce your tax bill and build long-term wealth is through tax-efficient harvesting.
At State Bank Wealth Management, we believe in making smart decisions today that pay off tomorrow. Tax-efficient harvesting is one of those smart decisions.
What Is Tax-Efficient Harvesting?
Tax-efficient harvesting is a strategy that uses the ups and downs of the market to your advantage. It includes two key techniques: tax-loss harvesting and tax-gain harvesting. Each offers a unique opportunity to manage your tax liability while staying focused on your long-term goals.
1. Tax-Loss Harvesting: Turn Losses into Savings
Markets go up—and sometimes, they go down. Tax-loss harvesting allows you to make the most of those down periods. Here’s how it works:
If you sell an investment at a loss, you can use that loss to offset any gains you've made on other investments. That means less tax owed on your profits. And if your losses exceed your gains, you can use up to $3,000 of those losses to reduce your ordinary income. Any leftover losses? You can carry them forward to use in future years.
This strategy not only helps you minimize taxes, but it also gives you the chance to realign your portfolio without increasing your tax bill.
2. Tax-Gain Harvesting: Lock in Lower Rates
On the flip side, tax-gain harvesting involves selling investments that have gone up in value when you're in a lower income tax bracket.
Let’s say you expect your income to be lower this year than it will be in the future. By selling appreciated assets now, you can lock in lower capital gains tax rates and pay less tax overall. Later, you can reinvest in the same or similar assets to maintain your investment strategy.
Why It Matters
These techniques may sound technical, but their impact is very real. Tax-efficient harvesting can help reduce your current and future tax bills, giving your investments more room to grow. Over time, that can make a big difference in your financial picture.
Talk to a Wealth Advisor
Tax rules can be complex, and the right strategy depends on your personal financial situation. That’s why our Wealth Advisors are here to help. We work alongside your tax professional to make sure you're not just investing wisely, but also tax-efficiently.
If you’d like to learn more about how these strategies could work for you, let’s talk. Smart tax planning is just one way we help you stay on track for the future you’re working toward.
Let’s make your money work smarter—starting today.