Tax-loss harvesting still matters. “In 2018, tax rates are still higher on short-term gains versus rates on long-term gains,” says Nathan B. Rex, chief investment officer at New York-based Eigenvector Capital. Nevertheless, gains on long-term investments may be substantial given the stock market’s string of strong years recently. Whenever taxable gains can be offset with losses, investors benefit.
Cut Your 2018 Investing Tax Bill
Still, tax-loss harvesting is a tax deferral strategy, not a tax avoidance strategy. “Since you effectively lower your cost basis, you get a tax benefit now by taking the loss but create a larger tax liability in the future when you sell the [appreciated] asset,” assuming it continues appreciating, Collins says. If you expect your tax rate to increase in the future, you might think twice about using this strategy to reduce your current tax bill.