s the end of 2026 approaches, look beyond investment performance and consider how taxes may affect your overall returns. Although tax considerations generally shouldn't drive investment decisions, a year-end portfolio review may identify opportunities to reduce your taxes. Here are four to consider.
1. Harvest losses (or gains)
Review the capital gains and losses you've realized so far this year. If you have a net capital gain, you may be able to offset some or all of it through tax-loss harvesting before year end. This means selling some investments that have declined in value compared to what you paid for them.
If you expect to end the year with a net capital loss, consider selling some appreciated investments. The resulting gains can be offset by your already-recognized capital losses, essentially making the sale tax-free. But don't eliminate your entire net capital loss. Each year you generally can use up to $3,000 of net capital losses ($1,500 if married filing separately) to offset ordinary income (such as wages, business income and taxable retirement plan distributions). Any remaining losses can be carried forward indefinitely.
2. Avoid the wash sale rule
If you sell an investment at a loss for tax purposes, be mindful of the wash sale rule. Under this rule, if you sell a security at a loss and purchase the same or a substantially identical security within the 30-day period before or after the sale, the loss generally isn't deductible in the current year. Instead, the disallowed loss is added to the basis of the replacement security, postponing the tax benefit until the replacement security is sold.
To avoid this result, consider waiting at least 31 days before repurchasing the investment or replacing it with a similar — but not substantially identical — security. Purchases by a spouse or certain related entities can also trigger the wash sale rule.
3. Time the sale of appreciated investments
Before selling investments that have increased in value, consider whether you should wait until next year. If you expect your taxable income to be lower in 2027 — perhaps you're retiring or anticipating lower business income — delaying the sale could reduce the tax rate you pay on it.
However, if you expect to be in a higher tax bracket next year, selling in 2026 may be advantageous. Consider your expected income, cash needs and tax situation.
4. Donate appreciated securities
If you're planning charitable gifts, consider donating long-term appreciated securities instead of cash. This can help you avoid capital gains tax you'd have to pay on the appreciation if you sold the securities. Plus, if you itemize, you generally can claim a charitable deduction for the fair market value of the securities.
Don't donate stock that's worth less than what you paid for it. Instead, sell the stock so you can deduct the loss and then donate the cash proceeds to charity.
Moving forward
Talk with us before making significant investment moves. We can coordinate your investment decisions with your overall tax strategy.