UpTrajectory Review

CPA Practice Advisor's piece on year-end tax-loss harvesting arrives at the moment most small-business owners finally look up from operations and ask what the year did to them. The article explains how selling underperforming investments in taxable accounts can offset realized gains and reduce April's bill. The timing matters: losses must settle by December 31 to count for the current tax year, and the wash-sale rule bars you from repurchasing the same or a substantially identical security within 30 days before or after the sale. Miss that window and the loss disallows, deferred until you exit the replacement position.

For an operator running surplus cash through a brokerage account, this is not abstract portfolio theory. You may hold concentrated positions from an acquisition, legacy stock from a former employer, or index funds bought in strong markets. Harvesting losses converts paper declines into actual tax assets: losses first offset capital gains, then up to $3,000 of ordinary income annually, with the remainder carrying forward indefinitely. That carryforward has real value if you expect a liquidity event, a business sale, or a Roth conversion in coming years. The strategy also forces a discipline many owners skip: reviewing what you own and why, not merely what the business needs next week.

The piece understates one friction: harvesting losses in taxable accounts does not help retirement assets. Losses inside an IRA or 401(k) are already tax-deferred or tax-free; selling there accomplishes nothing. It also glosses over the trade-off between tax savings and investment returns. Selling a loser to book a loss may lock in underperformance if the asset recovers, and the wash-sale window leaves you sidelined or forced into a substitute that drifts from your target allocation. We agree with the core advice: tax-loss harvesting works best as a year-end hygiene check, not a market-timing tool.

Second-order effects split owners by circumstance. Those in high-tax states gain more from every harvested dollar; those in low-tax states or with modest portfolios may find the paperwork outweighs the benefit. Owners planning a 2025 exit should coordinate harvesting with their CPA now, since losses harvested this year can offset gains recognized next year. Owners with passive losses or real estate depreciation may already shelter income; adding harvesting complicates the return without adding much. The strategy also interacts with the 3.8% net investment income tax, making losses more valuable to households above the threshold.

What to watch: the IRS has not clarified whether cryptocurrency losses trigger wash-sale rules, since digital assets are not securities under current law. That gap may close, so do not build a strategy on it. For 2024, review taxable accounts before mid-December to allow settlement time. If you lack a CPA, this is the year to hire one; the cost of a missed wash-sale or a miscalculated basis exceeds the fee. Document every trade, match losses to gains deliberately, and decide whether you are harvesting to reduce taxes or to rebalance. The two goals often conflict.

The article's core point is sound: tax-loss harvesting is a tool, not a trick. Used well, it turns a disappointing year into a modest tax asset. Used poorly, it churns a portfolio and defers rather than avoids tax. The difference lies in planning, not in the strategy itself.

“Tax-loss harvesting is a strategy that potentially lowers the taxable income of investment returns held in taxable accounts.” — CPA Practice Advisor

Takeaway: Review taxable investment accounts before mid-December; harvested losses can offset gains and up to $3,000 of ordinary income, but the wash-sale rule applies.