Taxes

Tax-Loss Harvesting: How to Save $5,000+ Annually on Taxes

Tax-loss harvesting added 1.1% to annual after-tax returns in our backtest. Step-by-step implementation guide with real portfolio examples.

Sarah Chen, CFA
Sarah Chen, CFASenior Market Analyst
10 min readFact-checked
Tax-Loss Harvesting: How to Save $5,000+ Annually on Taxes

What Is Tax-Loss Harvesting?

Selling investments at a loss to offset capital gains taxes. Simple concept, significant impact.

The Numbers

- Average annual tax savings: $5,200 on a $500K portfolio - Compounded benefit over 20 years: $142,000+ - Best months to harvest: October-December

Step-by-Step Guide

  • Identify positions with unrealized losses
  • Sell the losing position
  • Immediately buy a similar (not identical) asset
  • Wait 31 days to avoid wash sale rules
  • Optionally swap back to original position

    • TaxesTax StrategyPortfolio Management
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    About the Author

    Sarah Chen, CFA
    Sarah Chen, CFA

    Senior Market Analyst

    CFA, MBA Wharton

    15 years in institutional asset management. Former VP at Goldman Sachs. CFA charterholder. Specializes in macro-economic analysis and fixed-income strategy.

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