If you want Save money for taxesYou are probably already familiar with popular tax advantage accounts such as 401 (K), IRA and health savings accounts (HSA). However, if you are investing too taxable Broker's accounts, you need to know how to navigate taxes on capital earnings.

Capital profits taxes are imposed on asset sales, which may include articles such as art, jewelry, real estate, digital products or RESERVES. Profits of short -term capitalMade from assets held for less than one year, are taxed as a usual income based on your tax bracket; Long -term capital gains are taxed to 0%, 15%or 20%, in accordance with graduate income thresholds.

A strategy known as Harvesting tax lossesOr the use of losses to compensate for capital profits on investment sold for a profit can help mitigate those costs – but it's not always simple.

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This was a problem that Mo Al Adham, the first adviser to Instaacart and the founder of the Twitter Twitter Video Video, wanted to choose. Harvesting tax loss can be “extremely difficult” to make yourself, with disappointing Spreadsheets and first mistakes for the course, Al Adham shows entrepreneur.

So in 2021, Al Adham founded burnishA Fintech company that offers automated, self-service investment self-service that “simplify sophisticated tax strategies traditionally available through wealth managers”. The company, which is supported by Greylock and counts industry leaders from Google and Meta among its angel investors, launched its initial product in 2023.

FREC offers an alternative, run product TAX Harvesting losses, says Al Adham.

“We break it down into individual shares and buy those shares for customers,” explains Al Adham. “Then we can generate tax loss by trading these shares. You are still taking the same performance as ETF, in essence, with a small tracking error. But you are getting these capitaland these capital losses you can use (to save taxes). “

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The FREC product requires a minimum investment of $ 20,000 – the amount needed to buy “small pieces of each stock”, AL Adham – but manages the average portfolio that FREC manages is about $ 200,000. Also also joined its direct index product with other supplementary offers, such as the ability to borrow against your portfolio.

“Let's say you have saved in stock format, you have bought indexes and now is the right time to renovate your bathroom,” says Al Adham. “Instead of selling your shares to renew your bathroom, (you can) get a credit against your shares to do it, and that's another The strategy of postponing taxes Because basically you are delaying the sale of your shares later, when they have appreciated even more. And there is no tax to get a loan to renovate your bathroom. “

Al Adham also points out that capital losses never expire in your life, which means you can move them forward to save in the future.

Al Adham uses the example of someone who invests $ 100,000 in a direct index and realizes $ 15,000 losses. Next year, that person sees $ 15,000 in capital profits, and previous loss compensates for new profits. However, even if that person does not sell wealth for a profit next year, they can still use losses to save income taxes – up to $ 3,000. In other words, someone earning $ 150,000 a year will pay taxes at $ 147,000.

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This $ 3,000 figure is at the root of a “very big misunderstanding” when it comes to harvesting tax loss, says Al Adham. Many people think that the savings strategy is caught by $ 3,000 – and therefore not worth the effort – but no: you can compensate $ 1 million in capital profits with $ 1 million capital, Al Adham notes.

“There are no boundaries there,” explains Al Adham. “The single limit is worth if you do not have lid profits to compensate and have losses of lids, and then the government allows you to get $ 3,000 of losses of your lid to offset the usual income earnings.”