KMFG Knight Miller Financial Group

Capital Gains Planning: How to Harvest Losses Without Falling Into the Wash Sale Trap By KMFG Knight Miller Financial Group Managing capital gains is no longer a once-a-year exercise. In today’s tax environment, effective capital gains planning requires ongoing attention, especially for investors with taxable portfolios. One of the most effective tools available is tax-loss harvesting , a strategy that allows investors to turn market declines into potential tax advantages. When used carefully, tax-loss harvesting can reduce current tax liability and improve after-tax returns. When used incorrectly, however, it can run afoul of the IRS wash sale rule , negating the intended benefit. Understanding how this rule works under U.S. tax law is essential to harvesting losses confidently and avoiding unnecessary regret. Understanding Tax-Loss Harvesting Tax-loss harvesting involves selling investments held at a loss in a taxable account in order to realize capital losses . Under the Internal R...