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Many investors focus on choosing the right stocks, funds or digital currencies, but overlook the tax mistakes that silently impact their returns every year. And if you don’t know how to take advantage of the rules already built into the tax code, you’ll likely miss out.
GOBankingRates spoke to tax experts to uncover tax filing mistakes that can cost investors $3,000 or more each year. Here’s what he said.
Treating taxes as a once-a-year event
If you’re like many people, taxes come to mind only during filing season. But by then, you may have missed out on many opportunities that could have reduced your tax bill.
“The biggest filing mistake I see is treating taxes as a once-a-year task rather than a year-round process,” said Christina Taylor, vice president of tax development and distribution. april. “When people only think about their returns in February or April, they miss out on credits and optimizations they’re actually eligible for.”
Missing opportunities for tax loss harvesting
Tax-loss harvesting allows you to sell poorly performing investments in taxable accounts at a loss to offset gains or reduce taxable income. If losses exceed gains, you can use up to $3,000 annually to offset ordinary income and carry the remainder over to future years.
Taxation consultant and founder David Kang said, “Failure to realize losses during market downturns hinders the abilities to recoup profits or reduce ordinary income by as much as $3,000 per year.” protector tax. “Too often, investors hold on to losses for too long and lose potential tax benefits.”
Timing matters because markets don’t always stay down. As Kang concludes, “When to pull the trigger matters for the final tax bill as well as investment performance.”