Tariff-induced market volatility has many investors and retirees anxious about the state of their retirement accounts and other holdings. One (slight) silver lining? You could get a break on your 2025 tax bill. That’s because periods of volatility present an ideal opportunity for tax-loss harvesting, or selling select investments from a brokerage account at a realized loss to lower or eliminate taxes on other realized gains, says Tyler Horn, head of planning at Origin, a personal finance app. That could be gains from other stocks, real estate, or business sales.
Tax-loss harvesting is an often under-utilized strategy, despite significant possible benefits, Horn says.
“By strategically selling investments at a loss, investors can offset capital gains or even reduce taxable income by up to $3,000 per year,” he says, citing the annual IRS limit (that’s after losses offset gains). “Simultaneously, reinvesting in a similar asset allows them to take advantage of the market recovery.”
Markets have been a chaotic run for the past week, as President Donald Trump introduced, added to, and then paused tariffs on many U.S. Trading partners (those against China are a different story). It is too soon to know exactly what will happen with tariffs and the market, which is why many financial advisors say to take a “wait and see” approach with most of your financial planning.
Still, tax-loss harvesting can be a decent strategy when stocks are down. In fact, many planners were already advising their clients to look into it, as 2024 was a banner year for stocks, and tax-loss harvesting can help reduce your capital gains bill.
“Tax-loss harvesting is about timing,” says Belinda Herzig, senior wealth strategist at BNY Wealth, noting it is a strategy that can be revisited throughout the year whenever there is volatility, not just at the end of the year in a last-ditch effort to save some money.
If you still have unused losses after offsetting all of the gains and $3,000 in income, you can roll them over to other tax years indefinitely. So if you sell some Tesla shares at a loss, for example, you can use those losses for years to come.
Heed the wash-sale rule
There’s one thing to watch out for when it comes to tax-loss harvesting: The wash-sale rule. This basically means investors can’t buy or sell the same investment or a “substantially identical” one in the 30 days immediately preceding or following the day you harvested losses.
If you do buy the same or a similar asset, the tax loss will be disallowed. It can make sense to work with a financial professional on these types of transactions to make sure you’re not running afoul of it—or wait 30 days before making any other transactions.
