<\/p>\n
Expanded deductions for older Americans are changing the tax-planning equation for retirees, according to Jeffrey Levine, chief planning officer at Focus Partners Wealth.<\/p>\n
In an interview as part of the Focus on Finance Forum series, Levine explained that many retirees may now qualify for the 0% long-term capital gains tax bracket because of larger standard deductions and enhanced senior deductions. That shift could reduce the value of tax-loss harvesting strategies for some households.<\/p>\n
At the same time, Levine said tax-loss harvesting remains a valuable planning tool for investors who expect to realize large capital gains in future years or who want more flexibility managing concentrated stock positions.<\/p>\n
Below is a transcript of the interview with Levine, edited for brevity and clarity.<\/p>\n
Why tax-loss harvesting matters year-round<\/p>\n
Robert Powell: A reader wrote recently that they were interested in something called tax-loss harvesting and wondering when to do it and what time of year is best.<\/p>\n
Jeffrey Levine: That’s a great question as we kick off the year. A lot of people think about tax-loss harvesting only in the context of year-end planning, but it’s something you can do on a regular and ongoing basis.<\/p>\n
Levine explained that investors may lose the opportunity to capture losses if they wait too long and the investment rebounds. He used the example of a $100,000 investment falling to $90,000 early in the year before recovering later.<\/p>\n
He noted that investors cannot immediately repurchase the same investment because of the wash-sale rule, which generally requires waiting more than 30 days before buying it back.<\/p>\n
\u201cLosses are very valuable,\u201d Levine said. \u201cIf you have something that has gone down in value, then you want to make the most of it.\u201d<\/p>\n
How capital losses offset gains<\/p>\n
Robert Powell: You don’t do this in a vacuum. Maybe you have banked unrealized capital gains and can use capital losses against gains you realize later in the year.<\/p>\n
Jeffrey Levine: Losses give you optionality without a potential tax impact. They can make it easier for investors to rebalance portfolios or reduce exposure to concentrated stock positions without creating a large tax bill.<\/p>\n
Levine explained that capital losses first offset capital gains. If losses exceed gains, investors can generally use up to $3,000 annually to offset ordinary income, with remaining losses carried forward into future tax years.<\/p>\n
He used an example of an investor with $50,000 in losses and $20,000 in gains. The gains would be fully offset, and the investor could deduct another $3,000 against ordinary income, carrying the remaining $27,000 forward.<\/p>\n
When harvesting losses may backfire<\/p>\n
Robert Powell: Does the possibility that someone might pay 0% taxes on capital gains factor into the equation?<\/p>\n
Jeffrey Levine: There are some reasons not to capture capital losses. One of them would be if you are going to be in the 0% long-term capital gains bracket.<\/p>\n
Levine explained that paying taxes at a 0% rate can actually be preferable to continuing to defer taxes indefinitely because gains realized at a 0% rate effectively become permanently tax-free.<\/p>\n
He said retirees are increasingly likely to qualify for the 0% capital gains bracket because of larger deductions available under current law.<\/p>\n
Why more retirees may qualify for 0% capital gains taxes<\/p>\n
Levine said married couples age 65 and older may now benefit from:<\/p>\n
Standard deductions exceeding $30,000Additional age-based standard deductionsEnhanced senior deductions of $6,000 per person under the One Big Beautiful Bill Act<\/p>\n
According to Levine, some married retirees with total income of roughly $140,000 or less may still qualify for the 0% long-term capital gains bracket.<\/p>\n
He added that retirees with substantial itemized deductions could potentially have even higher income and still remain eligible for 0% capital gains treatment.<\/p>\n
What retirees should consider before selling investments<\/p>\n
Robert Powell: If I do decide to do some tax-loss harvesting early in the year and later learn that I’m in the 0% bracket for capital gains, can I carry that loss forward?<\/p>\n
Jeffrey Levine: If you capture the loss, the first thing that happens is the loss offsets your gains. So if those gains otherwise would have been taxed at 0%, you may have wasted losses that could have been more valuable later.<\/p>\n
Levine said the decision ultimately depends on an investor\u2019s broader tax picture and future plans.<\/p>\n
Should you do this? Maybe yes, maybe no. It really depends upon your personal situation.\u201d <\/p>\n
Related: Fidelity reveals giving mistake quietly costing donors<\/p>\n
#Taxloss #harvesting #delivers #surprise #retirement #break<\/p>\n","protected":false},"excerpt":{"rendered":"
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