Capital Gains and Harvesting Losses: Should You Act Now?

Year-end tax strategy or unnecessary shuffle? Let’s take a closer look.

As the calendar year winds down, many investors start thinking about ways to reduce their tax liability. One strategy that often comes up is tax-loss harvesting—selling investments at a loss to offset gains realized elsewhere in your portfolio.

But like most tax strategies, the right move depends on your specific situation.

At Stahlnecker Wealth Management Group, we encourage clients to consider the whole picture before making any moves. Here’s what you should know.

What Is Tax-Loss Harvesting?

Tax-loss harvesting is the process of selling investments that are currently worth less than what you paid for them—realizing a loss that can be used to offset capital gains elsewhere in your portfolio.

In general:

• Capital gains are profits from the sale of investments held for more than a year.

• Capital losses can reduce your taxable gains—and even offset up to $3,000 of ordinary income if your losses exceed gains.

Unused losses can typically be carried forward to future tax years.

When It Can Make Sense

Tax-loss harvesting may be beneficial if:

• You've realized significant gains earlier in the year and want to offset part or all of the tax liability.

• You hold underperforming positions that no longer fit your long-term investment strategy.

• You're looking to rebalance your portfolio in a tax-sensitive way.

In these situations, harvesting losses can improve tax efficiency without compromising your broader financial goals.

But Timing and Tactics Matter

Before selling, it’s critical to consider:

• The Wash Sale Rule: If you sell a security at a loss and buy a “substantially identical” investment within 30 days before or after the sale, the loss is disallowed for tax purposes.

• Market Recovery: Selling solely for tax reasons may cause you to miss potential rebounds—especially in volatile or long-term growth positions.

• Reinvestment Strategy: You’ll need a plan for how to keep your portfolio aligned while the loss is being realized.

A thoughtful, coordinated approach is essential to avoid short-term reactions that undermine long-term results.

Capital Gains: When to Realize, When to Wait

It’s not just about losses—sometimes realizing gains intentionally can make sense, especially in a lower-income year or when you have offsetting losses.

There are situations where it may be wise to:

• Lock in gains during a year when you fall into a lower capital gains tax bracket

• Reset your cost basis on appreciated assets

• Diversify highly concentrated positions with minimal tax impact

Again, this requires coordination with your tax professional and advisor to evaluate both the tax implications and the investment impact.

So, Should You Act Now?

There’s no one-size-fits-all answer. But here’s how we help clients decide:

• Review year-to-date realized gains and losses

• Evaluate any potential portfolio changes that align with long-term strategy

• Coordinate with your CPA or tax advisor before taking action

• Ensure the benefits of any sale outweigh the transaction costs, opportunity costs, or tax complications

A Coordinated Plan Brings Confidence

Tax-loss harvesting isn’t about chasing deductions—it’s about making smart, intentional decisions in the context of your full financial plan.

At Stahlnecker Wealth Management Group, we help clients integrate tax strategy with long-term goals—not just react to the headlines or calendar.

If you’re wondering whether a move makes sense this year, start with a Financial Fire Drill™. It’s our step-by-step process to uncover potential risks and opportunities, including tax strategies that match your unique goals.

Let’s start the conversation.

Because smart planning doesn’t wait until April.