Don’t Waste That Loss: Your December Play to Hide Portfolio Gains
Hello there, I’m Tony, and welcome back to Financial Friday!
In the last few weeks, we’ve covered the defensive plays—from shielding your budget against Black Friday debt to making tax-smart donations of your winners. You are in control of your spending and maximizing your charitable impact.
Now, we focus on the final, advanced investment move for the year: Tax-Loss Harvesting.
It sounds a bit silly, doesn’t it? As disciplined investors, we want to buy low and sell high. But right now, we need to look at our losses not as mistakes, but as opportunities to minimize the taxes due in three months. This strategic move is all part of making the most efficient ascent to the top of our Wealth Mountain.
This simple action—Tax-Loss Harvesting—is the final power move to keep more of your hard-earned Monthly Money working for your family’s future.
1. The Big Idea: Turning Lemons Into Tax Savings
The concept is simple: The IRS allows you to use your investing losses to offset your investing gains.
If you have realized capital gains this year—say, you sold a successful position or received a large distribution from a mutual fund—the IRS will tax you on that profit. Tax-Loss Harvesting uses your portfolio’s losses to offset those profits.
The Math: A Simple Opportunity to “Hide” Gains
- The Problem: You have $10,000 in realized gains (taxable profit).
- The Opportunity: You find a stock or ETF that you bought but is currently worth $8,000 less than what you paid for it.
- The Action: You sell that losing position before December 31st to “realize” the $8,000 loss.
- The Result: You only report a net gain of $2,000$ ($10,000 – $8,000) that is subject to tax. You just used your losses to “hide” $8,000 of your gains from the IRS!
The Extra Bonus: The $3,000 Deduction
If your losses exceed your gains, you get an extra gift:
- You can use up to $3,000 of any remaining net loss to offset your ordinary income (your salary). This is a direct deduction that lowers your taxable income.
- Any losses beyond that $3,000 can be carried forward indefinitely to offset future gains. Your loss never expires!
2. Don’t Get Caught in the Year-End Market Noise
You are right to notice that the market can get a bit volatile right now. This is a common phenomenon driven by larger investors and institutional fund managers making massive, time-sensitive tax moves.
- The Effect: You might see disproportionate selling in certain sectors where big funds are “cleaning house”—selling their losers to realize tax losses before the deadline. This can cause brief, strange dips in a stock’s price, creating market “noise.”
- Your Strategy: The Ascender’s job is not to react to this noise, but to use it. This is simply the market executing a strategy you should be executing, too. Have your plan ready, identify your target losers, and don’t let temporary dips or volatility scare you out of making your own calculated tax move.
3. The Decisive Action: The “Sell and Swap” Rule
This is where the strategy moves from simple to smart. You can’t just sell a loser and buy it back immediately; the IRS is watching!
The Wash-Sale Rule prevents you from claiming a tax loss if you buy the same stock or a “substantially identical” security in the 61-day window (30 days before the sale, the day of the sale, and 30 days after the sale).
The rule is designed to stop people from getting a tax break while never leaving their position. But as Ascenders, we don’t want to leave the market! We want to stay invested and growing.
The Solution: The “Sell and Swap”
You must sell the loser and immediately buy a similar, but not identical, replacement.
| If you sell… | You can immediately buy… | Why it works |
| A major S&P 500 ETF (e.g., VOO) | An S&P 500 ETF from a different company (e.g., SCHX) | You stay invested in the U.S. stock market without violating the “substantially identical” rule. |
| A specific tech stock (e.g., Intel) | A different stock in the same sector (e.g., AMD) | You maintain your exposure to the technology market. |
The key is to remain invested so your money is always working for you, but to avoid buying the exact same ticker symbol for at least 31 days. This single, disciplined move protects your deduction and your compounding.
4. Your Actionable Plan Before December 31st
The clock is ticking on 2025. You must execute this transaction before the market closes on December 31st to claim the loss this year.
- Run the Report: Log into your taxable brokerage account. Pull the realized gains data for the year. See how much profit you have locked in.
- Identify the Target: Scroll through your holdings and find any investment with an unrealized loss.
- Plan the Swap: Before you click “Sell,” know exactly which similar-but-different stock or ETF you are going to buy immediately afterward. Write down the ticker symbols.
- Execute the Trade: Sell the loser and execute the buy order for the replacement immediately.
This is a true Monthly Money power move. It’s proactive, efficient, and ensures you keep more of your money working to fund your freedom and your family’s future.
Your Next Action: Run that report today and make a list of your “Sell” and “Swap” targets.
