Podcast: Tax-Loss Selling for 2022 Year-EndNov. 16, 2022
In today’s special episode, Kevin Prins, John Waters and Mark Raes talk taxes. After a challenging time in the markets, our experts dive into tax-loss selling strategies to help investors navigate the year’s end. They also discuss the must-know tax rules, the advantages of using ETFs for tax harvesting, and important dates to remember.
Kevin Prins is the Managing Director, Head of ETFs and Managed Accounts Distribution at BMO Global Asset Management. He is joined on the podcast by in-house experts John Waters and Mark Raes. John Waters is a Vice President and Director of Tax Consulting Services at BMO Wealth Planning and Advisory Services. Mark Raes is Head of Product at BMO Global Asset Management.
The episode was recorded live on November 16, 2022.
Canada and the US are trying to scale back the pandemic spending over the last few years and find new sources of tax revenue to pay back the deficits created. Canada has a focus on supporting the middle class such as the new first-time tax-free home savings account which is expected to be introduced in 2023. There has also been a key theme in transparency with increased disclosure for trusts and aggressive tax planning.
Tax Loss Selling
Tax loss selling is a year end tax strategy where you tally up any realized capital gains and losses in all of your taxable non-registered accounts. If there is an overall net capital gain, you would consider triggering some capital losses to offset the gains that were realized in the current year to reduce your current year tax liability.
Tax Loss Harvesting
By disposing of securities with accrued capital losses, investors can help offset taxes otherwise payable in respect of other securities that were sold at a capital gain. The proceeds from the sale of these securities can then be reinvested in different securities with similar exposures to the securities that were sold, in order to maintain market exposure. If capital gains are not available in the current year, the realized losses may be carried back for three years to shelter gains realized in those years or carried forward to reduce capital gains in upcoming years. The ability to recognize a capital loss for tax purposes may be restricted in certain circumstances, including where the acquired security is identical to the security that is sold. Investors should not repurchase the loss security within 30 days of the loss sale. Investors should consult their own tax advisor to ensure that restrictions do not apply.
Important dates to remember: December 28, 2022 – Last day for Canadian and U.S. tax-loss selling (with T+2 settle).
Exchanges traded funds (ETFs) are effective tools for investors to help navigate these uncertain markets and can be used to help crystallize loss from a tax perspective. ETFs provide low cost, diversified portfolios that are great for tax harvesting since there are many solutions that provide different sector exposure and or similar exposures to many popular securities.
Please note the tables below are used for illustrative purposes only, where losses are calculated based on year-to-date. For tax purposes, capital losses are based on the difference between price sold and book value.
BMO ETFs: Tax-Loss Harvesting Guide 2022
|Total Return YTD as of Oct 11, 2022||BMO ETF||Ticker|
|SHOP||SHOPIFY INC - CLASS A||-79.20||BMO S&P/TSX Capped Composite Index ETF||ZCN|
|IMG||IAMGOLD CORP||-60.66||BMO Equal Weight Global Index ETF||ZGD|
|AP-U||ALLIED PROPERTIES REAL ESTATE||-37.26||BMO Equal Weight REITS Index ETF||ZRE|
|MG||MAGNA INTERNATIONAL INC||-34.15||BMO Equal Weight Industrials Index ETF||ZIN|
|CCA||COGECO COMMUNICATIONS INC||-33.71||BMO Global Communications Index ETF||COMM|
Source: Bloomberg Oct 11th, 2022
|Ticker||Name||Total Return YTD as of Oct 11, 2022||BMO ETF||Ticker|
|NFLX||NETFLIX INC||-63.58||BMO Covered Call Technology ETF|
|NVDA||NVDIA CORP||-60.25||BMO Covered Call Technology ETF||ZWT|
|MODERNA INC||-51.00||BMO Equal Weight US Health Care Hedged to CAD Index ETF BMO BMO Equal Weight US Health Care Index ETF||ZUH ZHU|
|INTC||INTEL CORP||-49.77||BMO Covered Call Technology ETF||ZWT|
|NKE||NIKE INC -CL B||-47.14||BMO MSCI USA Hight Quality Index ETF||ZUQ|
Source: Bloomberg Oct 11th, 2022
|Ticker||Name||YTD Return (%)||Ticker||Name|
|VAB||Vanguard Canadian Aggregate Bond ETF||-11.88||ZDB||BMO Discount Bond Index ETF|
|iShares Core Canadian Universe Bond ETF||-11.89||ZDB|
BMO Discount Bond Index ETF
|HBB||Horizons CDN Select Universe Bond ETF||-12.02||ZDB||BMO Discount Bond Index ETF|
|ZAG||BMO Aggregate Bond Index ETF||-11.87||ZDB||BMO Discount Bond Index ETF|
CIBC Active Investment Grade Corp Bond ETF
|-11.20||ZCDB||BMO Corporate Discount Bond ETF|
|ZCB||iShares Core Canadian Corp Bond ETF||-10.94||ZCDB||BMO Corporate Discount Bond ETF|
Vanguard Canadian Corporate Bond ETF
|-10.09||ZCDB||BMO Corporate Discount Bond ETF|
Source: Bloomberg September 30th, 2022
For more on this topic please review BMO ETFs: Tax-Loss Harvesting Guide 2022
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