Weekend Reading: Is Tax-Loss Harvesting Worthwhile?

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
Weekend reading is tax loss harvesting worthwhile Weekend reading is tax loss harvesting worthwhile
Weekend Reading

Tax-loss harvesting often becomes a hot topic of discussion at the end of the year and amidst volatile periods in the market. In short, it’s a strategic investment strategy where you sell assets at a capital loss to offset other capital gains, therefore minimizing taxable income and optimizing your investment portfolio.


When to employ: Before you consider tax-loss harvesting, you should be aware of the wash sale rule. It imposes a 30-day look back and a 30-day look forward period, which prevents the recognition of a capital loss if a substantially identical asset is bought within that time frame. With this in mind, tax-loss harvesting is worth considering in the following scenarios:

📌 To offset a significant capital gain from selling a business or second home, reducing taxable income.

📌 To offset up to $3,000 in annual earned income, utilizing tax-rate arbitrage to save on taxes.

📌 To diversify from over-concentration in a particular asset, reducing capital gains tax while reallocating the portfolio.

When to avoid: There are also less effective uses of tax-loss harvesting, such as in the case of zeroing out gains in your portfolio. Doing so may not provide a net tax benefit and merely postpone the inevitable taxes to a future year. Further, downsides to tax-loss harvesting include: The requirement for losses to negate gains first, potentially leading to wasted losses if not carefully planned. Additionally, if you pass away with unused tax losses, the opportunity disappears.

Tax-loss harvesting is an incredibly powerful wealth-building tool when used properly, but it must be done intentionally. At Howard Bailey, we can build you a customized tax-loss harvesting strategy to create tax alpha for your wealth.