Tax-Loss Harvesting Beyond December: Year-Round Strategies for Smarter Investing

While the deadline for tax-loss harvesting is in December, as portfolios are being reviewed and last-minute trades are made, this practice shouldn’t just be a year-end activity. In fact, taking a year-round approach to tax-loss harvesting can help you manage risk, stay tax efficient, and strengthen your investment strategy.

Let’s look at what tax-loss harvesting is, how it works, and why you should consider it as a year-round strategy versus just a year-end consideration.

What Is Tax-Loss Harvesting?

Tax-loss harvesting is the process of selling investments that have declined in value to realize a capital loss.¹ That loss can then be used to offset capital gains realized elsewhere, including in the current year, the 3 previous years, or in future years. The goal of tax-loss harvesting is to reduce your overall tax bill.

In Canada, this strategy is most relevant for investments held in non-registered accounts, since capital gains (and losses) in registered accounts like RRSPs, TFSAs, and RESPs are sheltered from tax.

Why Tax-Loss Harvesting Should Be a Year-Round Strategy

While year-end tax preparation is what most people think of when they consider their tax strategy, there are many advantages to monitoring tax-loss opportunities throughout the year.

Market volatility doesn’t follow the calendar. Markets can dip at any time, creating potential loss-harvesting opportunities that might not exist at the end of the year.

By considering tax-loss harvesting throughout the year, you can avoid rushed decisions and act more strategically. Acting on your tax situation throughout the year gives you time to evaluate your positions and reinvest wisely rather than making rushed trades before the December 31 deadline.

Tax-loss harvesting throughout the year can improve portfolio balance. Selling underperforming assets mid-year can help rebalance your portfolio and reallocate capital to better-performing sectors or asset classes.

How Year-Round Tax-Loss Harvesting Works

Here are some steps and tips to help you get started with year-round tax-loss harvesting.

1. Monitor Portfolio Performance Regularly

Set quarterly or semi-annual reviews to evaluate unrealized gains and losses in your non-registered accounts. Together, we can review your portfolio to identify opportunities to harvest losses without compromising your long-term goals.

2. Be Mindful of the Superficial Loss Rule

In Canada, the superficial loss rule prevents you from claiming a capital loss if you (or your spouse or a company you control) buy an identical investment within 30 days before or after selling it.² This rule applies to both direct purchases and automatic contributions, so timing and substitution matter.

Instead of repurchasing the same security, consider a similar, but not identical, investment (such as a different ETF that tracks the same index), switching to a comparable mutual fund with slightly different holdings, or waiting 31 days to repurchase the same asset if that’s what makes sense for your strategy.

3. Reinvest Strategically

The goal of tax-loss harvesting is not just to realize losses but to maintain your desired risk tolerance. By reinvesting in a correlated but not identical security, you may be able to stay invested while realizing the loss for tax purposes.

4. Track Opportunities for Future Gains

If your capital losses exceed your capital gains for the year, you can carry the unused losses back up to 3 years or forward indefinitely.³ By keeping detailed records, we can help maximize those opportunities when future gains arise.

When Tax-Loss Harvesting May Not Make Sense

There are situations where harvesting losses might not be beneficial. For example, a transaction’s costs could outweigh the potential tax benefit, selling a high-quality investment could derail your long-term plans, or your portfolio is concentrated in registered accounts. We can help you assess if and when tax-loss harvesting makes sense and if it justifies the trade-offs.

Tax-loss harvesting doesn’t have to be a year-end scramble. By monitoring your portfolio regularly and acting on opportunities as they arise, you can take a more consistent, proactive approach to managing your tax liability and long-term growth.

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Take Care,

Jerry Broussard, CFP®

Jerry Broussard is a Kaplan, La and Lafayette, La Fee-Only Financial Planner serving the entire Gulf Coast region. Broussard Financial Group, LLC specializes in providing objective financial planning to help clients build, manage, grow, and protect their assets through life’s transitions. Jerry Broussard is also a NAPFA-Registered Financial Advisor and a CERTIFIED FINANCIAL PLANNER™ Professional.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.