Page 1: What Is Harvesting Losses and Why It Matters
When you invest in stocks, mutual funds, or other assets, sometimes you make money. This is called a capital gain. Other times, you lose money. That’s called a capital loss. But did you know that losing money on some investments can actually help you save money on your taxes?
This idea is called harvesting losses to offset capital gains. It’s a smart way to manage your taxes by selling investments that have lost value, then using those losses to cancel out gains from other investments.
Let’s say you sold some stock in 2025 and made $5,000 in profit. That’s a capital gain, and you might owe taxes on that amount. But if you also sell other stock that lost $3,000, you can subtract that loss from your gain. Now you only owe taxes on $2,000 instead of the full $5,000. Pretty helpful, right?
This technique is called tax-loss harvesting, and it can be a powerful strategy. But it works best when you understand the strategy and timing behind it.
Page 2: How the Strategy Works
The key to using this technique well is knowing which investments to sell and when. Not every losing stock is a good choice to sell. Timing matters, and so does your overall financial plan.
Here’s how the strategy and timing works when harvesting losses to offset capital gains:
- Review your portfolio – Near the end of the year, look at your investments. Are any of them worth less than when you bought them?
- Match losses to gains – If you’ve sold investments for a profit, you can sell others that lost value to cancel out those gains.
- Watch out for the wash-sale rule – This rule says you can’t buy the same investment again within 30 days, or your loss won’t count for taxes. Be careful not to break this rule.
- Use extra losses – If your losses are more than your gains, you can use up to $3,000 of extra losses to lower other income (like wages). If you still have leftover losses, you can save them to use next year.
Let’s go back to our example. You made $5,000 in gains but lost $6,000 in other investments. You use $5,000 to cancel out your gains, and $1,000 to lower your other income. That means you pay less in taxes now, and keep more money in your pocket.
This is why harvesting losses to offset capital gains: strategy and timing is so important. It’s not just about selling losing investments. It’s about doing it at the right time and for the right reason.
Page 3: Best Timing Tips for 2025
In 2025, smart investors are already thinking ahead. The best time to start planning for harvesting losses to offset capital gains is before the end of the year, usually in the fall.
Here are some timing tips to keep in mind:
- Start early – Don’t wait until December 31st. Give yourself time to plan.
- Check for big gains – If you’ve had a good year with stocks, you may owe more taxes. Time to look for losses to harvest.
- Think long-term – Selling a stock might help now, but could cost more later. Think about your long-term goals.
- Talk to a pro – A financial advisor or tax expert can help you make the best decisions.
In short, harvesting losses to offset capital gains: strategy and timing takes some thinking, but it’s worth it. You can lower your taxes and keep more of your money working for you. Just remember the rules, watch the timing, and don’t be afraid to ask for help.
By being smart with your money in 2025, and using harvesting losses to offset capital gains the right way, you’re building a better financial future, one smart step at a time.
