But maybe you want to keep some promising but currently struggling investments in your portfolio. In that case, you could consider selling them, harvest the loss and then buy them again. Just work with your tax professional so that you’re waiting more than 30 days before repurchasing—if you buy substantially similar investments 30 days before or after the initial sale, you might trigger “wash sale” rules and may not be able to claim the losses on your tax return in that year.
Taking capital gains in different years
Another option to discuss with your tax professional may be to “spread the sale over multiple tax years — that can help ease the burden,” says Jonathon McLaughlin, investment strategist for Bank of America.
You might, for example, sell part of an investment that’s performing strongly at the end of 2022, another part during 2023 and the final portion at the beginning of 2024, thereby completing the sale in a little over 12 months while spreading potential capital gains over three tax years, McLaughlin notes.
But don’t forget that waiting to sell involves risks. The advantages of holding on to those assets, McLaughlin notes, may not outweigh the benefits of selling now and reaping the rewards, even if it comes with a greater tax bill now.