As the year winds down, now is a good time to review your investment performance and make any necessary adjustments before the end of the calendar year. However, tax-loss harvesting is one of the most overlooked opportunities, especially among higher-net-worth families in Colorado.
Think of it as weeding your garden. This year-end strategy removes underperforming assets from your portfolio when done strategically and in coordination with your broader investment plan. By realizing these losses, you can avoid the taxes due on the sale of appreciated investments in taxable accounts. By realizing offsetting gains and losses, you can rebalance your accounts and position them for future growth with improved tax efficiency.
In today’s article, we’ll look at five of the most frequently asked questions related to tax-loss harvesting, along with hypothetical examples, and how the right Denver wealth management team can help you apply this strategy across your taxable accounts:
- What Is Tax-Loss Harvesting, and How Does It Work?
- When Is the Best Time to Use Tax-Loss Harvesting?
- What Is the Wash-Sale Rule, and Why Does It Matter?
- How Does Tax-Loss Harvesting Fit into Long-Term Wealth Management?
- Can Tax-Loss Harvesting Work Alongside Charitable Giving or Estate Planning?
When used thoughtfully, this strategy can help offset gains, rebalance portfolios, and reduce the tax you pay on the sale of appreciated investments.
What Is Tax-Loss Harvesting, and How Does It Work?
At its core, tax-loss harvesting means selling investments in taxable accounts that have declined in value to offset taxable gains when you sell taxable investments. It doesn’t change your investment performance, but your tax liability for the year.
Hypothetical Example: Offsetting Gains from a Strong Year
Suppose a Denver business owner sold shares in a private company earlier in the year, realizing a $250,000 capital gain that is taxable. The portfolio also includes technology and real estate investments that are down roughly the same amount.
By strategically selling those underperforming holdings, the losses can offset the gain of selling the shares in the private company, thereby reducing your capital gains taxes.
The proceeds can then be reinvested into new opportunities, often within similar economic sectors, to maintain the diversification of your portfolio.
This type of coordinated sale typically occurs under the guidance of Denver investment advisors, such as Jupiter Wealth, who can analyze the holdings of your taxable portfolio and identify where realizing losses to offset gains makes sense without disrupting the overall investment strategy.
When Is the Best Time to Use Tax-Loss Harvesting?
While tax-loss harvesting can technically be done at any time during the year, it’s most effective toward the end of the year, when you have a clearer view of total realized gains, losses, and your tax liabilities.
Q4 is often the prime window because it allows time to:
- Realize strategic losses before December 31 (the IRS deadline for current-year deductions)
- Rebalance taxable portfolios for the next calendar year
- Align investment timing with income fluctuations, tax liabilities, and/or upcoming liquidity events
Hypothetical Example: A Late-Year Adjustment
A Colorado couple planning to retire in early 2026 anticipates a higher tax bill this year due to exercising stock options. By working with their wealth manager in Denver, CO, they identified $80,000 of unrealized losses in their international equity holdings.
Selling these positions before year-end offsets their gains and helps lower their current tax liability, freeing them to re-enter similar markets in January once the 30-day window (under IRS rules) has expired.
If you are juggling business income, real estate sales, and trust distributions, timing tax-loss harvesting around these events can make year-end planning far more efficient and productive.
What Is the Wash-Sale Rule, and Why Does It Matter?
The wash-sale rule prevents someone from claiming a tax deduction if they buy the same, or a “substantially identical” security, within 30 days before or after selling a current holding at a loss. This rule applies across all taxable accounts, including those owned by spouses or other identified entities.
Hypothetical Example: A Common Misstep
Imagine a person sells 1,000 shares of an S&P 500 ETF at a loss on December 10 to harvest the tax loss. On December 20, they invest in the same ETF through a different account.
Reinvesting within 30 days could trigger a wash sale, disallowing the entire loss for the year. To avoid this, financial planners in Colorado often recommend temporarily reinvesting in a similar, but not identical, investment.
For example, selling an S&P 500 ETF and buying a total-market ETF can maintain similar market exposure while avoiding any wash sale liabilities.
This nuanced understanding of the wash-sale rule is one reason many high-net-worth families rely on Jupiter Wealth, a Denver wealth management firm, for portfolio strategy and management, especially when managing multiple accounts, trusts, or other taxable entities.
How Does Tax-Loss Harvesting Fit into Long-Term Wealth Management?
Tax-loss harvesting isn’t just a year-end tactic; it should be part of an ongoing wealth management discipline that balances investment, tax, and estate considerations across multiple timelines.
A thoughtful approach can be:
- Maintain portfolio discipline by selling underperformers
- Offset capital gains from liquidity events or real estate sales
- Help rebalance risk exposures without incurring unnecessary taxes
Hypothetical Example: Integrating with a Family Office-Style Plan
Consider a family in Cherry Creek with $12 million in investable assets, managed across trusts, individual taxable accounts, and a donor-advised fund. Their Denver wealth management team reviews performance quarterly, identifying opportunities to offset losses in one trust with gains realized in another. At the same time, their CPA coordinates carry-forward losses into the next tax year to prepare for a planned property sale.
Tax-loss harvesting becomes less about a single transaction and more about orchestrating every aspect of the family’s financial picture, including investments, taxes, and estate strategies, under one coordinated plan.
Read our blog: Maximize Year-End Investments: 5 Tax Strategies From a Denver Wealth Manager.
Can Tax-Loss Harvesting Work Alongside Charitable Giving or Estate Planning?
Absolutely. Tax-loss harvesting can complement both strategies if your family gives generously or is managing a complex estate.
Hypothetical Example: Combining Giving and Harvesting
In this example, a Denver couple contributes to a donor-advised fund each December. In 2025, they plan to donate $150,000 of appreciated stock: assets that have gained significantly in value, to maximize their charitable deduction.
At the same time, their wealth manager in Denver identifies $150,000 in losses within their fixed-income portfolio. By harvesting those losses, they offset taxable gains elsewhere in their portfolio while maintaining their overall philanthropic and investment strategies.
When combined with estate planning, tax-loss harvesting can also create opportunities to reduce taxable gains for heirs or trusts, ensuring the family’s assets are structured more efficiently for future generations.
How Jupiter Wealth Can Help Coordinate the Process
At Jupiter Wealth, coordination is key to achieving long-term financial goals. Tax-loss harvesting is most effective when it is aligned with your comprehensive financial picture, including investments, tax projections, cash flow, and family priorities.
Our process includes:
- Collaboration between advisors, CPAs, and estate attorneys
- Real-time performance tracking to identify loss opportunities early
- Tax-aware portfolio rebalancing before year-end
- Multi-year tax strategy planning for ongoing optimization
This level of coordination enables you to focus on your life and family, while our team of specialized advisors handles the technical details behind the scenes.
If you’re reviewing your portfolio before the end of the year, consider scheduling a discussion with the financial planners at Jupiter Wealth in Denver, Colorado. The right team can help you assess your situation, coordinate decision-making across multiple advisors, and make strategic year-end decisions that keep your wealth preservation strategy on track.
Contact us to schedule a complimentary conversation about your financial situation.
