Tax-loss harvesting is useful only when the whole household is coordinated.
The tax code lets capital losses offset capital gains, but implementation details decide whether the strategy helps or creates unusable clutter.
What to get right
- Losses offset capital gains first, then a limited amount of ordinary income.
- Wash sales can disallow losses across accounts and spouse accounts.
- Replacement funds should preserve exposure without creating accidental bets.
- Losses need a use case: rebalancing, concentrated-stock sales, fund transitions, or future gains.
- Tax-loss harvesting should not override the long-term investment policy.
Advisor role: connect harvesting to the actual tax return, not just portfolio software.
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