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Mind the rules: Leveraging this move isn’t foolproof, however. There are a few stipulations to be aware of before you move forward. Three things in particular to be mindful of include:
📌 Violating the wash-sale rule: This prohibits you from selling an investment for a loss then replacing it with the same or "substantially identical" investment 30 days before or after the sale. To steer clear, check for dividends before selling in every account.
📌 Buying the dividend: When you purchase a stock or fund before the ex-dividend date, you owe taxes on the dividend paid. To avoid this payment, remember to check the ex-dividend date and if “a dividend is near, consider waiting until after the ex-dividend date.”
📌 Breaking tax thresholds: Capital gains can push you into a higher marginal tax bracket, so be sure to monitor how close you are to reaching thresholds.
You have tax strategies at your disposal to implement year-round. The first step is understanding what’s in your tool box, and the second is knowing the rules.