It’s That Time of Year: Let’s Talk Tax-Loss Harvesting

As the calendar creeps toward its final pages, investors everywhere start thinking about markets, year-end strategy, and, yes… taxes.

Over the next few months, you’ll probably hear the phrase tax-loss harvesting tossed around like confetti at a financial New Year’s party. Fortunately, the concept is far simpler than its reputation suggests.

At its core, tax-loss harvesting involves a quick portfolio checkup:

• Review your portfolio and identify any positions currently sitting at a loss.
• Sell those losing positions and replace them with another security that provides similar market exposure, keeping your portfolio fully invested while capturing the tax benefit. Our ETF Comparator can help you find similar funds for the swap.

Why bother? Because realizing those losses can help offset realized gains within the same calendar year. It’s a way of smoothing out your tax bill without leaving the market.

A friendly reminder: the IRS has rules around what counts as “similar exposure” — read our Wash Sale Rule Guide for the full breakdown — so it’s worth checking in with a tax preparer or financial advisor before harvesting season begins in earnest.

Fall may be known for pumpkins and changing leaves, but smart investors know it offers something else: the chance to do a little harvesting of their own.

Keep Exploring

• Understanding the Wash Sale Rule — Know the IRS rules before you harvest
• Dividend Tax Estimator — Estimate your federal and state tax on dividend income
• ETF Comparator — Find replacement securities with similar exposure
• ETF Screener — Discover funds that fit your strategy
• SEC Yield vs. Distribution Yield — Understand the yield metrics before you trade