10/22/2026
It’s harvest season again!
But we're not referring to harvesting crops in the field…but rather tax opportunities in your portfolio.
Every investor knows that stocks can go up or down. The gains are obviously good, but what about losses? Is there any way to turn a decline to our advantage?
It may surprise you to learn that the answer is yes.
Investments that decline may actually serve to lower your tax bill. This is called TAX-LOSS HARVESTING, which essentially means selling securities that have decreased in value to realize a capital loss, and using the loss to offset realized gains.
One study found that when done intentionally, accurately, and consistently, reducing taxes on your investment gains can increase after-tax returns by 1.10%.
Over time, this can make a big difference!
In cases where the investor does not have a realized capital gain but does have losses in a portfolio, the tax code allows a $3,000 deduction in capital losses to be deducted from ordinary income each year. Losses in excess of the $3,000 may be carried forward indefinitely … an important planning tool for future portfolio strategy moves.
What if you have a losing investment that you’d like to harvest, but also don’t really want to sell?
Well, you can always buy it back if you like, so long as you wait 31 days after the date of the sale.
That’s because of the WASH SALE RULE, which states that if the security sold is replaced with an identical one within 31 days before or after the sale, the tax loss is voided.
Tax-loss harvesting is not a requirement for investors, of course, and there are other ways to make your portfolio more tax-efficient. But if you aren’t taking advantage of tax-loss harvesting or aren’t sure whether your financial professional is or not, it’s definitely a technique to consider.
Let us know if you have any questions!
Source: Shomesh Chaudhuri, Terence Burnham, Andrew Lo, “An Empirical Evaluation of Tax-Loss Harvesting Alpha.” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3351382
Disclosure: Cetera Advisors LLC exclusively provides investment products and services through its representatives. Although Cetera does not provide tax or legal advice, or supervise tax, accounting or legal services, Cetera representatives may offer these services through their independent outside business. This information is not intended as tax or legal advice.
