The stock market has been very volatile this year and has gone down more than usual. To combat this, many investors have started to participate in tax-loss harvesting. According to Investopedia.com, tax-loss harvesting is the timely selling of securities at a loss to offset the amount of capital gains tax due on the sale of other securities at a profit.
“What we have is possibilities to drive down taxable income in some form while persons try to reconfigure whether or not they're taking the appropriate risk as a portfolio strategy,” says Jae Oh, author of Maximize Your Medicare. It is also important to note that tax-loss harvesting, by reducing your taxable income, can also lower health insurance premiums. “For example, those persons who are receiving the Affordable Care Act APTC— which is the Advanced Premium Tax Credit— the reality is if you are lowering your taxable income, even this year, that will reduce your health insurance premium,” Jae Oh says.
For those on or soon to be on Medicare, it does provide good news if they’re paying the income-related monthly adjustment amount or IRMAA. Tax-loss harvesting has the potential to reduce their IRMAA two years later if they start right now.
In fact, there are other tax-related steps people can take now, according to Oh. “If, for example, persons have become unemployed or reduced hours, et cetera, to make financial distress heightened in this uncertain time that for whatever reason, you can make adjustments for income and you receive the APTC, you can actually claim that adjustment this year now,” Oh says.