If you hold investments in a taxable brokerage account, tax-loss harvesting is one of the few legal moves that can lower your tax bill without changing your long-term strategy. The idea is simple: when an investment drops below what you paid for it, you sell it to “realize” the loss, then use that loss to offset capital gains elsewhere in your portfolio. The IRS lets you net losses against gains dollar for dollar, and if your losses exceed your gains, you can deduct up to $3,000 against ordinary income each year and carry the rest forward indefinitely.
Here is a concrete example. Say you sold a stock earlier in the year for a $10,000 gain. Left alone, that gain is taxable — at the federal long-term capital gains rate of 15% for most investors, that is $1,500 owed. But suppose another position in your account is down $10,000. If you sell it and harvest that loss, it cancels the gain entirely, and your tax on that trade drops to zero. You have not changed how much money is in your account — you have simply used a paper loss to erase a real tax.
The IRS wash-sale rule can disallow a loss when the same or a substantially identical security is purchased within the 61-day window. Staying invested may require a replacement that is not substantially identical, but a different ticker, provider, or index name is not automatically a safe harbor. Compare holdings, index methodology, rights, and exposure with a qualified tax professional before trading.
Tax-loss harvesting matters most in volatile years, in higher tax brackets, and in larger taxable accounts. It does almost nothing inside a 401(k) or IRA, because those accounts are already tax-sheltered — which is why coordinating your taxable and retirement accounts together matters. It is also a year-round discipline, not a December scramble: the best opportunities appear during market dips throughout the year, and a good advisor harvests them as they happen. This is exactly the kind of work we fold into our capital gains tax planning and our guide to capital-loss carryovers.
Unused eligible capital losses generally carry to later tax years until used, retain their short- or long-term character, and can offset future capital gains under the Schedule D rules. Pairing harvesting with strategic Roth conversions, charitable gifting of appreciated stock, and year-round tax planning is how the strategy compounds. The investors who benefit most are not the ones who harvest once; they are the ones whose tax strategy and investment plan are run by the same team, so every trade is made with its tax impact in view.
The bottom line: tax-loss harvesting can be a useful planning tool for investors with taxable gains and eligible losses, but it has to be done carefully to avoid the wash-sale trap and to stay aligned with your real allocation. If you have a taxable account of any size, it is worth a conversation. Call (225) 396-5511 for a free review of your situation.
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Call (225) 396-5511It can reduce current tax or defer tax, depending on the gains offset, applicable rates, holding periods, future sales, and available carryovers. The result is taxpayer-specific and is not guaranteed.
If you sell a security at a loss and buy the same or a substantially identical one within 30 days before or after, the IRS disallows the loss. A replacement investment must not be the same or substantially identical. A different ticker or provider alone does not guarantee compliance, so compare holdings and rights and obtain tax advice before trading.
Losses first offset capital gains with no limit. If losses exceed gains, you can deduct up to $3,000 against ordinary income per year ($1,500 if married filing separately) and generally carry unused eligible losses to later years until used, subject to Schedule D calculations and taxpayer-specific rules.
No. Those accounts are already tax-deferred, so there is no taxable gain to offset. Harvesting only works in taxable brokerage accounts.