If you sold a winning stock, a crypto position, or an investment property this year, you're about to meet a capital gains bill. For Los Angeles, CA investors that bill can be steep — California's top income tax rate of 13.3% is the highest in the nation and stacks on top of federal tax — and tax-loss harvesting is the single most reliable legal tool for shrinking it. Most people leave it on the table every December.
The principle is simple: the IRS lets you use realized investment losses to offset realized gains, dollar for dollar. Sell one position at a $40,000 gain and another at a $40,000 loss in the same year, and your net taxable gain is zero. If losses exceed gains, you can apply up to $3,000 against ordinary income and carry the rest forward indefinitely.
The trap that wrecks most DIY attempts is the wash-sale rule. If you sell at a loss and buy the same or a substantially identical security within 30 days before or after, the IRS disallows the loss — and the rule reaches across your taxable and retirement accounts. The fix is to rotate into a similar-but-not-identical fund so you stay invested while the loss still counts.
Timing matters more when state tax is in play. The planning question isn't just when to sell the loser, but how to sequence sales across tax years to stay out of the next bracket and under the 3.8% Net Investment Income Tax. An investor across the Los Angeles area taking a large one-time gain — selling a business stake, for instance — can pair it with a deliberate harvest in the same year to blunt the hit.
Harvesting isn't only for stocks. Los Angeles, CA investors hold losses in real estate partnerships, concentrated startup equity, and digital assets. Crypto can be especially powerful, but the rules are tightening — never run that play without a professional confirming the current treatment, because a disallowed loss plus penalties costs far more than the planning.
At Big Ass Tax Returns we handle the harvest and the return together so the strategy actually lands on your 1040. For Los Angeles, CA investors who want year-round, portfolio-level tax planning, we coordinate with our sister advisory firm, Michelet Financial, which builds the ongoing harvesting and capital-gains strategy that feeds the return.
Big Ass Tax Returns serves clients in Los Angeles, CA and nationwide. Get a strategy built around keeping more of your money.
Call (225) 396-5511Losses offset gains dollar for dollar, so the savings equal your loss times your marginal rate. For a high earner in a high-tax state, each $10,000 of harvested loss against a long-term gain can save several thousand dollars. Excess losses offset $3,000 of ordinary income a year and carry forward indefinitely.
It disallows your loss if you buy the same or a substantially identical security within 30 days before or after the sale — and it applies across all your accounts, including IRAs. Rotate into a similar but not identical fund and wait at least 31 days to avoid it.
Often yes, and crypto has historically fallen outside the securities-only wash-sale rule — but the treatment is changing and varies by asset. Always confirm the current rules with a tax professional before harvesting and repurchasing.