Market volatility can (understandably) spark anxiety, but seasoned investors and financial professionals recognize these moments as opportunities to manage taxes strategically. One such strategy is tax-loss harvesting — a tactic designed to reduce your taxable income by selling investments at a loss, offsetting capital gains, and potentially generating tax savings. 

Understanding Tax-Loss Harvesting

Tax-loss harvesting involves selling securities that have declined in value to realize a capital loss, which can then offset capital gains from other investments. If your losses exceed your gains in any given year, you can use up to $3,000 to offset ordinary income, with the remainder carried forward to future tax years.  

Tax-Loss Harvesting During Volatility

Market downturns often present prime opportunities for tax-loss harvesting. In volatile markets, stocks may dip below your purchase price. Selling these underperformers allows you to realize losses that can be strategically used to offset gains realized elsewhere in your portfolio. 

The Wash-Sale Rule

An essential consideration is the IRS’s wash-sale rule, which prevents investors from claiming a loss if they purchase the same or a substantially identical security within 30 days before or after the sale. To maintain market exposure while avoiding the wash-sale rule, you might buy a different, yet similar, security to replace the one you sold. 

Integrating Into Your Financial Plan

Tax-loss harvesting isn’t just a year-end strategy; it can be integrated throughout the year, particularly during volatile periods. By methodically employing this strategy, investors can enhance after-tax returns and achieve greater financial efficiency. 

Your Financial Advisor

At Credent, we provide critical guidance in navigating complex financial landscapes, helping investors make informed decisions that support long-term goals. By identifying opportunities such as tax-loss harvesting, an advisor can enhance after-tax returns and strengthen overall portfolio performance, turning market downturns into strategic advantages. 

With more questions, reach out to an advisor using the form below.  

Adapted from: “Tax-Loss Harvesting Amid Market Volatility.” FMeX. 2025. https://abm.emaplan.com/ABM/MediaServe/MediaLink?token=5f01926371324ec29bd6561db597a2d1  

CX Institutional, LLC d/b/a Credent Wealth Management is a Registered Investment Advisor (RIA) headquartered in Indiana with over $4.3 billion in assets under management, offering a uniquely client-centric approach to wealth management through commission-free, transparent, and impactful financial planning and investment strategies. Since its inception in 2018, Credent has grown rapidly through a combination of organic growth and strategic acquisitions focused on providing advisors with a customized, cooperative transition as they build their own succession plans. Credent’s culture creates lasting, meaningful relationships, enabling advisors to do their best work while ensuring clients can maintain their standard of living without financial worry. Credent has been recognized on multiple industry lists, including Forbes America’s Top RIA Firms since 2023, Financial Advisor Magazine’s 2025 Top 50 Fastest Growing Firms and InvestmentNews 2025 5-Star RIA Firms. For more information, visit CredentWealth.com.