Between market dips and economic curveballs, 2025 has already been a rollercoaster for investors—especially for those in their 20s and 30s trying to build wealth in a turbulent world. One tool worth knowing about amid all this volatility is tax-loss harvesting. It might sound like finance-speak, but it’s a smart way to make the most of an unfortunate investment situation—and lower your tax bill in the process.
What is tax-loss harvesting, and why should you care?
Tax-loss harvesting is a strategy where you sell investments that have lost value to offset gains you’ve made elsewhere in your portfolio. Basically, it helps you shrink your tax bill by balancing out the money you made with the money you lost.
If your losses are bigger than your gains, you can use up to $3,000 each year to offset your regular income (like your salary). If your total losses are more than that, you can carry the extra forward and use them in future years.
Say, for example, you made $5,000 selling one stock but lost $3,000 on another. Instead of paying taxes on the full $5,000 gain, you’d only pay taxes on $2,000.
“It’s looking for a silver lining on a pouring, rainy, cloudy day,”certified financial planner Sean Lovison, founder of Philadelphia-area Purpose Built Financial Services, told CNBC.
Why it’s especially relevant now
On April 8, the S&P 500 took a hit, closing at its lowest level in nearly a year. The cause was a mix of global uncertainty and fading optimism over potential tariff rollbacks. For anyone who’s watched their portfolio slip lately, that kind of drop might feel like a punch to the gut—but it can also be a chance to do some tax-smart cleanup. If you have investments in the red, selling them could actually help your overall financial picture when it comes to tax season.
One big catch: the “wash sale rule”
Before you go fire-selling all your losing stocks, it’s important to know about the wash sale rule, which says that if you sell an investment at a loss, you can’t buy it—or something “substantially identical”—within 30 days before or after that sale. If you do, the IRS won’t let you claim the loss on your taxes.
Let’s say you sold an ETF that tracks the S&P 500. Buying a different ETF that tracks the exact same index within that 60-day window? That’s probably going to trigger the rule and cancel out your tax break. You can still stay invested by picking similar but not identical assets—think of it like switching from Coke to Pepsi instead of Coke to Diet Coke.
Should you DIY or call in backup?
Tax-loss harvesting can be a solid move, but it’s not a one-size-fits-all play. Depending on your income, goals, and what you’re invested in, it might make sense to consult a financial advisor or tax professional. Some robo-advisors even automate this for you—just check what’s included in your investment platform.
Tax-loss harvesting isn’t about giving up on your investments—it’s about being strategic with how you handle losses, especially in shaky markets. If you’ve started investing and want to grow your wealth long-term, learning how to minimize taxes is a power move.
