Tax Loss Harvesting 101

Tax loss harvesting is a strategy that uses investment losses to help manage taxes. In a taxable brokerage account, selling an investment that is down can realize a loss. That loss may offset gains elsewhere, and in some cases a limited amount of ordinary income, subject to IRS rules.

It sounds mechanical. In practice it is a judgment call about risk, wash sale rules, timing, and what you still want to own.

This page explains the basics in plain language. Your numbers, cost basis, and account types decide whether it helps. If you want that review done carefully, contact us and we will walk through your portfolio with you.

What is tax loss harvesting?

You sell an investment at a loss in a taxable account. You may use that realized loss to offset realized capital gains. If losses exceed gains, a limited amount may offset ordinary income in a given year, with the rest carried forward under current rules.

The goal is not to chase losses. The goal is holding, then waiting out the window before returning to the original if you still want it. The details are technical. Guessing is expensive.

Does harvesting change my risk?

It can, if you sit in cash too long or replace a holding with something that does not fit your plan. A good harvest keeps your intended exposure roughly intact. A poor harvest turns a tax idea into an accidental market bet.

When is harvesting most useful?

Volatile markets create more candidates. Large realized gains in the same year create more reason to look. Charitable giving, concentrated stock, and year end planning often bring the topic up. Harvesting every small dip is not always worth the complexity.

How does this fit a wider plan?

Tax loss harvesting is one tool. Asset locatioc idea.

Should I harvest losses every year?

Not automatically. Some years have little to gain. Some years have a lot. The portfolio and the tax year decide.

Does Hawaii have special wash sale rules?

Wash sale rules are federal. Your state tax picture still matters for the overall outcome. We can discuss how federal moves land in your plan whether you live in Hawaii or on the mainland.

Author: Christian Park, Managing Advisor, Lēʻahi Private Wealth

Want this applied to your portfolio?

If you have taxable accounts and a year with gains, losses, or both, do not leave the decision to a generic checklist. Contact Lēʻahi Private Wealth. We will look at your situation and help you decide what to harvest, what to keep, and what to leave alone.

Educational information only. Not tax, legal, or personalized investment advice. Tax rules change. Confirm details with your tax professional. Advisory services offered through Kingswood Wealth Advisors (KWA), an SEC registered investment adviser. Securities services offered through Kingswood Capital Partners, LLC (KCP), member FINRA/SIPC.

n, holding periods, Roth conversions, charitable gifts, and your expected tax bracket next year all interact. A loss that looks helpful in isolation can be less helpful once the full year is modeled.

How our practice approaches this

At Lēʻahi Private Wealth, we do not treat tax loss harvesting as a slogan. We look at your taxable lots, gains already taken, wash sale risk across accounts, and whether a replacement holding still matches your allocation. When it makes sense, we harvest with a plan. When it does not, we say so.

Online articles cannot see your cost basis or your other accounts. We can. If you want a practical answer for your situation, reach out. We will review what you hold and help you decide what is worth doing this year.

FAQ

Is tax loss harvesting only for the wealthy?

No. Anyone with taxable investment gains or carryforward planning can benefit in the right year. Account size changes the stakes, not the basito keep a sensible portfolio while being thoughtful about the tax bill attached to it.

Where does it work?

Tax loss harvesting generally applies to taxable brokerage accounts. IRAs and 401(k) style accounts usually do not generate capital losses you can harvest the same way. Location of the asset matters as much as the loss itself.

What is the wash sale rule?

If you sell a security at a loss and buy the same or a substantially identical security within a short window before or after the sale, the IRS may disallow the loss for now. People trip on this when they sell a fund and immediately buy something nearly identical, or when a similar purchase happens in another account.

Staying invested after a harvest often means buying a similar but not identical