High-income investors often look beyond traditional strategies to optimize taxes, preserve wealth, and support long-term goals. Two of the most powerful—yet often misunderstood—tools are tax-loss harvesting and gain harvesting. Both strategies involve realizing capital gains or losses intentionally, but for different reasons and with different outcomes.
When used correctly, these approaches could smooth taxable income over multiple years, maximize thresholds for capital gains rates, and even tie into estate planning.
Today’s wealth technologies make this easier than ever by providing real-time visibility into gains, losses, and tax projections across multiple accounts. At Beckley & Associates, we use AI-supported modeling tools that simulate different harvesting scenarios to help investors plan with greater precision.
Here’s a closer look at how each works, when to use them, and how they fit into a broader wealth plan.
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What Is Tax-Loss Harvesting?
Tax-loss harvesting is the practice of selling investments at a loss to offset taxable gains elsewhere in your portfolio. In other words, you’re using losses on underperforming assets to reduce the taxes owed on profitable ones. It’s not about abandoning your investment strategy—it’s about being intentional with timing to make the tax code work in your favor.
Key benefits:
- Offset Capital Gains: Realized losses can reduce taxable gains from other investments.
- Offset Ordinary Income: Up to $3,000 of excess losses can offset ordinary income annually.
- Carryforward Benefits: Unused losses roll forward indefinitely, creating future tax advantages.
Example: If you sold a stock at a $50,000 gain, but harvested $30,000 in losses, your taxable gain drops to $20,000.
Modern portfolio platforms now incorporate automated loss scanning that flags unrealized losses and models the tax impact of harvesting them — helping high-income investors avoid missed opportunities.
For a deeper dive into deductions and offsets, see our blog on Overlooked Small Business Deductions.
What Is Gain Harvesting?
Gain harvesting flips the script: it’s the intentional realization of investment gains during years when your tax bracket is unusually low. Instead of avoiding gains, you accelerate them to take advantage of favorable tax treatment. By selling appreciated assets when income is lower, you can effectively “lock in” gains at little or no tax cost while improving your portfolio’s long-term efficiency.
Why do this?
- Maximize Zero or Lower Brackets: In 2025, the 0% long-term capital gains rate applies to taxable income up to $94,050 for married filing jointly or $47,025 for single and married filing separately (IRS thresholds).
- Reset Cost Basis: By realizing gains and immediately repurchasing, you establish a higher cost basis, reducing future tax exposure.
- Multi-Year Planning: Useful in years with unusually low income—such as a gap year, business transition, or before retirement distributions begin.
For example, realizing $20,000 in gains during a low-income year could mean zero tax owed—while permanently increasing the cost basis of your portfolio.
AI-enabled tax planning tools can analyze your projected income across multiple years and flag low-income windows where harvesting gains would produce the greatest advantage — an especially valuable capability for high earners with fluctuating business or investment income.
Tax-Loss Harvesting vs. Gain Harvesting: Which Is Right for You?
While both strategies revolve around realizing capital transactions, their objectives differ:
| Strategy | Primary Goal | Best Fit |
| Tax-Loss Harvesting | Reduce current tax liability by offsetting gains and income. | Years with large realized gains or volatile markets. |
| Gain Harvesting | Lock in lower tax rates and reset cost basis. | Low-income years or strategic estate planning windows. |
The right choice depends on your income level, portfolio structure, and long-term tax outlook.
Multi-Year Tax Efficiency: Why Timing Matters
Both strategies shine when viewed through a multi-year lens.
- Income Smoothing: By alternating between harvesting losses and harvesting gains, investors can keep taxable income within favorable brackets.
- Threshold Management: Carefully managing income levels ensures you maximize the 0%, 15%, and 20% capital gains thresholds without triggering the 3.8% Net Investment Income Tax.
- Charitable Integration: Pairing gain harvesting with charitable giving—such as donating appreciated stock—can amplify tax efficiency. See our recent post on Philanthropy With Purpose for how this fits into legacy planning.
AI-based tax forecasting tools are especially helpful here, allowing investors to visualize income brackets year-over-year and pinpoint the ideal years to harvest gains or losses.
Estate Planning Tie-Ins
For high-net-worth families, harvesting strategies also intersect with estate planning.
- Step-Up in Basis: Assets passed at death receive a cost basis reset, potentially making tax-loss harvesting less critical late in life.
- Gifting Strategy: Gain harvesting can make sense before gifting, raising cost basis for heirs while keeping taxes minimal.
- Trust Coordination: Coordinating harvesting strategies with Charitable Trusts or family wealth structures ensures maximum efficiency.
Automation tools can model how harvesting affects future estate value, cost basis changes, and potential tax liability for heirs, helping families choose strategies that align with their legacy goals.
For related guidance, see our post on Trusts vs. Wills – Estate Planning Strategies.
Pitfalls to Avoid
Even advanced strategies come with traps:
- Wash Sale Rule: For tax-loss harvesting, you can’t buy back the same (or “substantially identical”) security within 30 days before or after the sale.
- State Taxes: Some states don’t conform to federal capital gains thresholds, altering the benefit of harvesting.
- Timing Errors: Realizing too many gains in one year could push you into higher brackets or affect Medicare surcharges.
- Administrative Complexity: Coordinating across brokerage accounts, trusts, and family holdings requires careful tracking.
Strategic Harvesting in Practice
A well-structured plan might look like this:
- Year 1: Large business sale → harvest losses to offset gains.
- Year 2: Reduced income from transition → harvest gains at 0% or 15%.
- Year 3: Implement charitable stock donations or fund a donor-advised fund to offset future gains.
This multi-year approach reduces volatility in taxable income and maximizes long-term wealth preservation.
External Resources
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The Bottom Line
Both tax-loss harvesting and gain harvesting are powerful tools for high-income investors. The right choice depends on your income trajectory, investment mix, and estate planning goals.
When viewed across multiple years—and integrated with charitable giving, retirement distributions, or legacy planning—harvesting strategies help maximize wealth and minimize unnecessary tax drag.
At Beckley & Associates—a CPA firm in Plano, TX—we help guide clients in structuring advanced strategies that integrate taxes, investments, and estate planning. With the support of AI-enhanced forecasting, automated tax modeling, and real-time planning tools, we help ensure your decisions are both data-driven and aligned with long-term goals.
If you’re ready to explore how tax-loss harvesting or gain harvesting fits into your wealth plan, reach out to our team today.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Please consult with your tax advisor regarding your specific situation.