What's Tax Loss Harvesting? (And Why Should You Care?

Here's the deal: when you sell an investment for less than what you paid for it, that's called a capital loss. Now, most people think, "Great, I lost money AND I still have to deal with taxes." But actually, those losses can work in your favour.
You can use that loss to offset other gains you made during the year. Let me give you a real example. Say you sold some tech stock in a taxable account and made $10,000. Nice, right? Except now you owe taxes on that ten grand. But wait, you also have another tech fund that's down $4,000. If you sell it and harvest that loss, you only potentially pay taxes on $6,000 instead of the full $10,000.
And here's the kicker: if your losses are bigger than your gains? You can write off up to $3,000 against your regular income. That's money that would've gone to Uncle Sam staying in your pocket instead. Plus, any leftover losses roll forward to next year. They don't just disappear.

Why Everyone's Talking About This in November and December

You might be wondering why I'm bringing this up now instead of, say, February, when you're doing your taxes. Simple: by then it's too late.
When you get to November and December, you actually know what happened in your portfolio this year. You can see where you stand, what gains you've locked in, and roughly what your tax bill might look like. That's when you can be strategic about which losses to take.

The problem? December 31st is a hard stop. Whatever you do tax-wise needs to happen before the ball drops on New Year's Eve. That's why my phone starts ringing in mid-December with people asking "can we still do this?" Most times yes, but we're cutting it close.

Don't wait till the last minute. If you're even thinking about this strategy, now's the time to have the conversation.

The Wash Sale Rule: The IRS's Way of Saying "Not So Fast"

Okay, so you might be thinking, "Great, I'll just sell my losing investment, take the tax break, and buy it right back." Smart thinking, but the IRS thought of that too.
They created what's called the wash sale rule. Basically, if you sell something at a loss and then buy the same thing (or something substantially identical) within 30 days before or after the sale, that's a 60-day window total; they won't let you claim the loss.

How Do You Actually Make This Work?

You've got a few options, and honestly, they're not that complicated:
Instead of buying back the exact same mutual fund or stock, buy something similar but not identical. Like if you sold a S&P 500 fund, maybe buy a Large Cap Growth fund instead. Similar market exposure, different fund.
Some folks just wait the 31 days and buy back what they originally had if they really want it. Nothing wrong with that approach either.
The main thing is keeping your money working for you while still getting the tax benefit. You don't want to be sitting in cash for weeks if you don't have to be.

Why This Matters More When You're Retired (Or Close to It)

I've been doing this for over 30 years now, and I can tell you, taxes hit differently in retirement. When you're working, you've got deductions, maybe your employer's covering some benefits, and you're accumulating wealth. But in retirement? You're living off that wealth, and every tax dollar you can save is a dollar you can actually spend.
Tax-loss harvesting helps you:

Cut your tax bill on gains – Maybe you had to sell some stocks to cover an expense. Those losses can offset that gain.
Reduce your regular income – That $3,000 direct write-off? That's huge for retirees watching their income levels for Medicare premiums or Social Security taxation.
Set yourself up for future savings – Losses carry forward indefinitely. You're building a tax asset for future years.
Clean up your portfolio – Let's be honest, we all have investments we should've sold years ago. This gives you a reason to finally do it.
No limits on harvesting losses – Unlike capital gains, there's no cap on what you can recognize in losses. You can harvest as much as makes sense.

What You Actually Need to Do (Like, This Week)

Look, I'm not trying to pressure you, but I am trying to light a small fire under you. Every year I talk to people in January who say "I wish I'd known about this last year." Well, now you know.
Here's My Advice

Get your taxable portfolio reviewed now. Pull out all your statements. Look at what's up, what's down, and what you've sold this year. You need the full picture. If you aren't sure how to find this information, contact your financial professional for a report.
Talk to your tax person. Your CPA or tax preparer can run numbers showing exactly what this would save you. That's when you can make smart decisions.
Don't do this alone. If you've got a financial advisor, loop them in. If you don't, maybe it's time to talk to someone who does this stuff regularly. The coordination between your investments and taxes is where the magic happens. Here is our Financial Advisor.
Move before mid-December. Yes, you technically have until the 31st. But between the holidays, the markets being wonky, and everything needing to settle, you don't want to be scrambling on December 28th. Trust me on this.

Why We're Kind of Obsessed with This at ARHQ

We've built our whole practice around helping people in and near retirement hold onto more of their money. Sounds simple, but most advisors are focused on growing your money, not necessarily on keeping more of it after taxes.
That's what sets us apart here in Maumee. We look at everything, your investments, sure, but also your tax situation, your estate plan, your income needs. Tax-loss harvesting is just one piece of a bigger puzzle.
I've seen too many families get surprised by tax bills they didn't see coming. Or miss opportunities like this one because nobody told them about it. That bugs me. You worked your whole life for this money. The least we can do is help you keep as much of it as legally possible.

The Real Cost of Doing Nothing

Tax-loss harvesting isn't complicated. It's not some exotic strategy that only billionaires can use. It's available to anyone with a taxable investment account. But most people never do it because:

• Nobody told them about it
• They thought it was more complicated than it is
• They waited too long and missed the window
• They didn't think their losses were "big enough" to matter

Don't leave money on the table. That's literally what you're doing if you've got losses sitting in your account and you do nothing about them.

Want to see what this actually means for you? Give us a call at 419-842-0550. We'll look at your situation, run some numbers, and show you in plain English what tax-loss harvesting could save you. No charge for that conversation, and no pressure to do anything. We just want you to make an informed decision.
The clock's ticking. Let's make sure you stop overpaying on taxes and keep more of what you've earned.

Frequently Asked Questions

Can I harvest losses in my IRA or 401(k)?
Nope. You can’t harvest losses in an IRA or 401(k) because those accounts already get tax breaks. The IRS only allows loss harvesting in regular taxable investment accounts.
What if I've already sold investments at a gain this year?
Actually, that's perfect. This is exactly the situation where tax-loss harvesting shines. You've got gains that are going to be taxed. Now you can offset them with losses and lower that tax bill.
Is tax loss harvesting worth it for small losses?
You still can, but time’s tight. Late November is your last good window—trades need time to settle before year-end, so better to act now than rush later.
Do I need to wait until December to consider this strategy?
You could, but you're cutting it close. By late November you pretty much know how your year went. Acting now gives you time to do it right instead of rushing. Plus, if you need to make trades, they need time to settle before year-end.
Can this strategy help with Required Minimum Distributions (RMDs)?
Tax-loss harvesting doesn't reduce your RMD, that's a separate calculation based on your retirement account balances. But the tax savings from harvesting losses in your regular accounts can help offset the tax hit from taking those RMDs. It's about overall tax efficiency, not just one piece.

Securities offered through Peak Brokerage Services, LLC member FINRA/SIPC/MSRB. Advisory services offered through The Retirement Guys Formula, a registered investment advisor. The Retirement Guys Formula is a separate and independent entity from Peak Brokerage Services, LLC. This is educational information, not tax advice. Always consult with your tax professional before making tax-related decisions.