A “Non-Qualified” Brokerage Account is Good

Tax filing season has come and gone. Many of you had taxable accounts with me that went down in value in 2022. It was a rough year for the stock market.

The S&P 500 had a return of -19.64% in 2022. Including dividend reinvestment it was still -18.32%. Years like this aren’t uncommon, but they’re no fun.

The bright side of this meant some tax planning opportunities. In a taxable brokerage we were able to do something called tax-loss harvesting, which is a fancy way to say that we sold positions that were losing and replaced them with similar (but not the same) funds. We were able to realize losses for taxes without divesting the money.

Capital losses can be used to offset capital gains which can have a great impact on your total taxable income. If your total losses are greater than your total gains up to $3000.00 of net losses can be used to offset ordinary income.

If you have more than $3000.00 in net losses you can carry forward those losses to future tax years! It’s important to have updated tax documentation to make the most of these losses to keep your taxes as low as possible.

If you’re sitting on too much cash in bank accounts, this is just one reason a taxable investment account could be a good alternative.