Tax-loss harvesting basics — the strategy that quietly saved me $3,000
I missed tax-loss harvesting for five years before I figured out it applied to me. Cost me real money. Here are the basics.
What it is
If you have an investment that's down — a stock, ETF, or mutual fund worth less than you paid — you can sell it to "realise" the loss. That loss reduces your taxable income up to $3,000/year of ordinary income, with the rest carried forward indefinitely against future gains.
The wash-sale rule
You can't sell a losing investment and buy back the same thing within 30 days. The IRS calls this a wash sale and disallows the loss. The workaround: sell VTI (US total market) and buy VOO (S&P 500). Similar exposure, not "substantially identical" per the rules. The two are not interchangeable in the strict legal sense but they are interchangeable in your portfolio.
The 30-day window goes both directions. If you bought VTI 20 days before you sold it at a loss, that's also a wash sale. Watch automatic dividend reinvestments — those can trigger the rule without you noticing.
How much it actually saves
22% federal bracket, $3,000 in harvested losses: $660 saved. Plus state. On a $50K brokerage account during a bad year that's a real number. Worth doing in December once a year minimum, and worth running quarterly if your portfolio is over $100K and volatile.
The tools
Wealthsimple and Vanguard have automatic harvesting features built into their advisor-managed accounts. Worth turning on if you're already using one. For manual tracking, a paper tracking notebook ($15) keeps the cost basis side of the math straight when your broker's interface buries it. Quicken Premier handles it digitally if spreadsheets aren't your thing.
For crypto specifically: Koinly or CoinTracker. Both run $50-200/year depending on transaction volume.
Books worth reading
The Little Book of Common Sense Investing by John Bogle — basics, $15. Tax-Free Wealth by Tom Wheelwright covers broader tax strategy if you've outgrown the basics.
What to skip
Anything calling itself a "tax shelter" outside the standard tax-advantaged accounts (Roth IRA, 401k, RRSP, TFSA). Those are real. Schemes from podcast ads are not.
Honest take
If you have a brokerage account and any positions down, sell those positions in December, buy something similar within the wash-sale rules, claim the loss. $500-2,000/year for most people. Easy money you're leaving on the table.
