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tax loss harvesting as the end of the year is coming I'm sure a lot of you have some losses in your portfolio and when it comes to selling your position and recognizing a loss it is called tax loss harvesting in this video I'm going to go through some of the pros and cons how to do it and whether you should do it and what is really the benefits of doing it and what are some of the rules that you need to be aware of in case the tax Authority comes back to you and say you can't recognize that loss but this is actually something we went through in investing accelerator this week and I thought it would be very helpful for you to know as well so if you're interested in learning more about my investing strategy go to my website 5minuteinvesting.com free case study so let's get started first of all what is tax loss harvesting it is a capital loss that can use to offset a capital gain within a non-registered account so it just means that you're using your losses to offset any capital gain you have this year and as the market is down significantly this year and we're heading into December chances are you have some losses in your portfolio whether you invested in technology stocks that drop significantly like medium to small Tech or you invested in some other Industries like airlines that also went down as well it only works in a non-registered account meaning not a tfsa or rrsp in Canada it is not a 401k not a Roth in U.S not an RA so only regular investing accounts and you would look to do this before year end and generally Capital loss incurred can't be carried forward indefinitely to offset your future capital gain now to prevent people from gaming the system both the Canadian and the US governments have a wash sale rule so a wash sale is a transaction involving the sale of One Security within 30 days either before after the sales and purchasing a substantial identical stock or security either directly or indirectly through derivatives such as a call option so when you try to sell let's say you have apple and you have some losses and recognize that loss you cannot buy it back immediately because the CRA and rs will come get you and say hey you're just gaming the system you're not really selling your security so you need to wait 31 days in order to avoid the wash sale Rule and I'll tell you how you can avoid it now one possible way to avoid to wash your rule is that let's say you sell Apple and you buy an ETF in the technology industry so you're trying to buy ETFs with similar exposure so then it is a different security but still gives you the same exposure to the upside and the downside and that will allow you to recognize the loss this year and reduce your capital gain now if you plan to do tax loss harvesting you can for example switch from Apple to Microsoft or switch Google to Microsoft or switch Google to Apple so basically you're playing around within the same industry or similar exposure ETFs to do that when it comes to Canada you can net off capital gains you have this year and you can also carry back your losses for three years so if you have any capital gain last year or the year before and you want to net it off yes you can do so for up to three years and it is particularly helpful because 2021 2020 and 2019 are very bullish year now for U.S unfortunately you do not get to carry back Capital loss you can only carry forward and you can carry forward indefinitely which is fine but one thing you can do is that you can net off your Capital loss with income and you can net off up to three thousand dollars now if you're married and you're filing separately from your spouse then you only get to net off half of that so 1500 per person so that is pretty much and if you plan to do tax loss harvesting you should plan ahead do it in November or December and you don't do it on the very last day because usually it doesn't kick in for like one to two days so if you do it on a very last day and it takes another two days to process a transaction then you miss the deadline and it turns into the next fiscal year so try to do it early December if you are planning to do tax loss harvesting and that is it for this video and I hope you have a great day