Tax-loss harvesting is a strategic method used to reduce taxes by realizing investment losses in taxable (non-qualified) accounts and reinvesting the proceeds into similar—but not substantially identical—holdings. This allows investors to capture tax benefits while remaining fully invested according to their long-term strategy.

It is a powerful tool for improving after-tax returns, smoothing portfolio transitions, and turning market volatility into long-term financial advantage.

Tax-loss harvesting involves:

• Selling a security that has declined in value 
• Realizing the loss for tax purposes 
• Reinvesting proceeds into a similar (not identical) security 
• Maintaining target allocation and investment exposure 

❗ IMPORTANT: 
Tax-loss harvesting applies **ONLY** to non-qualified (taxable) investment accounts. 
Qualified accounts such as IRAs, Roth IRAs, and 401(k)s do NOT generate taxable gains or losses and therefore cannot use this strategy.

A coordinated tax-loss harvesting strategy can:

• Reduce federal and state tax liability 
• Offset realized capital gains 
• Reduce taxable income (up to $3,000 annually if losses exceed gains) 
• Improve long-term after-tax performance 
• Support portfolio redesign without excessive tax impact 
• Increase withdrawal flexibility in retirement 

One of the greatest long-term benefits of tax-loss harvesting is its ability to mitigate or neutralize **large future taxable events**.

Harvested losses can be “banked” and carried forward indefinitely, offering powerful flexibility when:

• Liquidating highly appreciated securities 
• Reducing concentrated stock positions 
• Transitioning from old holdings into a new portfolio 
• Harvesting gains during favorable markets 
• Preparing for major withdrawals 
• Managing unexpectedly large annual distributions 
• Rebalancing a portfolio with significant embedded gains 

These harvested losses function as a long-term **tax asset**, helping smooth future tax consequences and making it easier to restructure a portfolio when needed.

1. Identify investments with unrealized losses 
2. Sell positions to realize the loss 
3. Avoid violating the wash-sale rule 
4. Reinvest in a similar but not substantially identical investment 
5. Maintain strategic allocation and exposure 
6. Track losses for current and future tax years 

The IRS wash-sale rule disallows a tax loss if the investor purchases a “substantially identical” investment within 30 days before or after the sale.

To comply, replacement investments may include:

• Different ETFs tracking the same category 
• Alternative mutual funds in the same asset class 
• Securities with similar but not identical exposure 

Tax-loss harvesting supports long-term planning through:

• Safe withdrawal rate alignment 
• Sequence-of-returns risk mitigation 
• Tax-efficient withdrawal sequencing 
• Reducing tax impact during high-income retirement years 
• Coordinating with RMDs and inherited account rules 

During downturns, harvesting losses helps:

• Capture tax benefits 
• Reinvest at lower prices 
• Reduce emotional risk-taking 
• Maintain disciplined market exposure 
• Provide long-term tax flexibility 

Unused losses roll forward indefinitely, offering:

• Ongoing ability to offset future gains 
• Increased rebalancing flexibility 
• Lower long-term tax drag on the portfolio 

At Ametrine Wealth Strategies, tax-loss harvesting is coordinated with:

• Asset allocation 
• Rebalancing 
• Tax strategy and CPA collaboration 
• Retirement distribution planning 
• Portfolio redesign 
• Risk management 
• Estate and legacy considerations 

Tax-loss harvesting is not a stand-alone action—it is part of a cohesive, long-term planning discipline.

This material is for educational purposes only. Tax-loss harvesting may not be suitable for all investors. Investors should evaluate their tax status, portfolio objectives, and financial circumstances before executing this strategy.

Past performance is not indicative of future results. No investment strategy can eliminate risk or prevent loss. Consult your tax professional regarding your specific tax considerations.
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