As we approach the end of the year, here are three ways to reduce taxes by way of capital gains and losses. Keep in mind there are countless ways to lower your IRS burden, and the following tips will expire over the next few weeks (and renew again in 2026).
Lower Your Tax Bill
Last week I caught up with my dear friend Sophia over wonderful pizza at a new restaurant – with a large, warm, and comforting pizza oven – on the east side of Manhattan. She’s had a wonderful career working in the startup world. This year she started work at a new venture and decided to trade off a lot of equity in the new company for a lower salary.
She was asking me how she can reduce her tax burden through her investments. We will walk through a few examples that came up during our conversation. Here are three ways to reduce taxes:
- Cryptocurrency No Wash Sale
- Double Up Wash Sale
- Tax Gain Harvesting
No Wash Sale for Cryptocurrency
If you have a loss in crypto this year, you can use it to your advantage. The IRS considers cryptocurrency a property, not a security, and the wash sale rule only applies to securities.
Because of this, you won’t have to abide by the wash sale rule. The wash sale rule prevents immediately claiming a loss on a security if you buy the same security back within 30 days.
So you can sell crypto at a loss, and buy it back the next day. Then, you can report the capital loss on your tax return.
Double Up Wash Sale
Sophia has an unrealized loss on Golden Retriever stock that she would like to use for tax purposes. However, she doesn’t want to be out of the position for more than 30 days because she thinks the stock price will increase.
Currently, she owns 100 shares of the stock. She can purchase another 100 shares of Golden Retriever (second tranche), and sell the first set of 100 Golden Retriever shares.
By doing this she avoids the wash sale and keeps the second tranche of 100 Golden Retriever shares. So if the stock appreciates over the next 30+ days, she will capture the upside.
The last day that you can implement this strategy in 2025 is November 28th.
Tax Gain Harvesting
During 2025 Sophia is working at a new startup and earning below the $48,350 taxable income limit for 0% long term capital gains. This means that all of her long term capital gains will be taxed at zero percent!
She owns Brittany Spaniel stock and has made a nice gain on it. Sophia can sell the shares and buy them back right away. No waiting for 30 days and there is no wash sale because she has a gain on Brittany Spaniel stock.
Sophia will keep the investment in her portfolio and her long term capital gain will be taxed at zero. Better yet, she gets a higher cost basis in the shares because she purchased Brittany Spaniel at a higher price. This is a beautiful way to manage your taxes.
Tax Gain Harvesting Over $48,350 Taxable Income
Let’s dive a little further into this example. Let’s say you are single and you earn a $58,000 salary. This is over the $48,350 threshold mentioned above. However, you can still use the standard deduction to lower your long term capital gains taxes to zero.
First, take the standard deduction of $15,000 and then you have taxable income of $43,000. Then you can sell $5,350 worth of stock for a gain and not pay any long term capital taxes. The illustration is here:
| Taxable Income | $58,000 |
|---|---|
| Standard Deduction | ($15,000) |
| Taxable Income | $43,000 |
| Capacity for LTCG taxed at 0% | $5,350 |
If you are the cusp of the 15/20% long term capital gains threshold, you can still use a similar approach to pay 5% less on your long term capital gains.
We can chat about this if you’d like.
Wrapping it All Up
As you can see these three ways to reduce taxes are powerful. Hopefully you can put them to good use. They are a little tricky so if you need help, please consult your financial advisor and CPA.