Is Tax-Loss Harvesting a Good Strategy?

Keystone Financial Group |

As the end of the year approaches, taxes become a popular topic. In this quick article, we'll discuss one way to potentially lower the taxes you pay.

It's a technique called tax-loss harvesting and it's designed to help you reduce your capital gains taxes by selling assets that have lost value.

Tax-loss harvesting can be complicated (and not always a good idea), so here are 3 things you should know before you make any changes:

1) Determine whether you have short-term or long-term gains. If you sold an asset that you held for less than a year, you generated short-term capital gains. And these are taxed at higher rates than long-term capital gains.

2) Separate your apples and oranges. When selling assets for a loss to offset your capital gains, you need to keep apples with apples and oranges with oranges.

I.e., Short-term losses are used to offset short-term gains, while long-term losses offset long-term gains.

3) Don't let your tax bill drive your whole strategy. It can be a bad idea to sell assets strictly to harvest a tax loss, especially if those assets still belong in your portfolio.

No one likes paying taxes, but ultimately, your goal is to build wealth, so make your investment decisions with that goal in mind.

Bottom line: Tax-loss harvesting can be a savvy way to reduce your capital gains taxes, but it needs to be coordinated with your overall planning.

Have questions? Reach out to our office and we can work together to identify the right time to liquidate under-performing investments if and when it makes sense for you.




Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.

This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific situation with a qualified tax professional.