We are also beginning to trigger our year-end tax loss selling on our short ETFs. By tax planning today, and triggering our capital losses by selling our positions that remain underwater, we can cut our portfolio losses by claiming refunds on past capital gains taxes paid (at our top marginal tax rates) on capital gains/losses in the past, present, or even the future.
Tax-loss Harvesting; It’s A Good Thang
These tax losses will then be carried back 3 years (forward indefinitely) to offset any capital gains tax paid in those years – and note any excess can usually be carried forward.
By switching between the US shares and the CDN short shares ETF, one can maintain (or rebuild or destruct) a hedged (short) position without triggering superficial loss rules.
In the end, we will receive a tax refund to redeploy early in the new year. Either way, getting tax refunded is a good thing in any year – but this year, it will be especially valuable as a bonus part of your investment plan.
Nothin’ like using other people’s money.