Tax-Loss Harvesting for CRNAs: Turn Your Investment Lemons Into Tax Lemonade with Direct Indexing

Updated October 12, 2026

Nobody enjoys watching an investment lose money. In a taxable account, there may be a way to put that loss to work.

Tax-loss harvesting is one way to turn investment lemons into tax lemonade. The trick is making the tax decision fit the investment plan. A write-off isn’t much help if getting it leaves you with the wrong portfolio.

What is tax-loss harvesting?

You sell an investment for less than its tax basis and use the realized loss to offset capital gains. If total capital losses exceed gains, you can generally deduct up to $3,000 of the remaining loss against other income each year, or $1,500 if married filing separately. Unused losses can carry forward. See the IRS rules.

This applies to taxable investments. Selling at a loss inside your IRA or 401(k) does not create the same capital-loss deduction.

A gain or loss is generally long-term after holding an investment for more than one year. One year or less is short-term. Net short-term gains are generally taxed at ordinary income rates; net long-term gains may qualify for lower rates.

A simple example.

You paid $20,000 for a stock that is now worth $15,000. You also sold another investment for a $4,000 gain. Assuming no other gains, losses, or wash sales:

1. Selling the stock realizes a $5,000 capital loss.
2. That loss offsets the $4,000 capital gain.
3. The remaining $1,000 can reduce other taxable income. At an assumed 32% federal marginal rate, that is another $320 in tax savings.
4. You have used the full $5,000 loss. There is no loss left to carry forward in this example.

The tax savings from offsetting the $4,000 gain depend on the rate that would otherwise apply to that gain. The $320 is only the benefit from the remaining deduction.

Stay invested. Watch the wash-sale rules.

You do not necessarily need to sit in cash after selling. A suitable replacement can keep your money invested, but it cannot be substantially identical to what you sold.

The wash-sale window includes the 30 days before and the 30 days after the sale. Purchases in another account, automatic dividend reinvestment, an IRA purchase, or a spouse’s purchase can create problems. A different ticker alone does not settle whether two investments are substantially identical. IRS Publication 550 explains the rules.

This needs to be coordinated across accounts. A replacement investment can also perform differently from the original. Keep the intended allocation in view when making the trade.

What direct indexing adds.

With an index ETF, you own shares of a fund. With direct indexing, you own individual stocks selected to track an index. That creates more individual positions to review for losses, even when the index itself is up.

More opportunities do not automatically mean a better result. Direct indexing adds costs and complexity, and its returns can differ from the index. Weigh those tradeoffs against the losses you are likely to use. A simpler ETF portfolio can still be the better fit.

Read the direct-indexing guide.

What is the tax benefit actually worth?

There is no reliable annual percentage to plug into everyone’s plan. The result depends on your tax rates, realized gains, existing loss carryforwards, future withdrawals, fees, and investments.

Harvesting often defers tax. Selling and replacing an investment at a lower price generally leaves you with a lower tax basis, which can mean a larger taxable gain when you eventually sell. That future tax belongs in the comparison.

It does not take a market crash to find a useful loss. Individual holdings can decline while the broader market rises. More frequent monitoring may find opportunities, but more trading is not automatically better.

Is it worth considering for you?

Start with three questions: Do you have a taxable account? Do you have gains or other income that can use the loss? Can you make the trade without disrupting your investment plan?

When the grocery cashier tells me I saved $4.25, I still know I spent $87. An investment loss deserves the same perspective. A tax benefit can soften the blow; it does not erase the loss.

Educational information only. The example is hypothetical and does not show an actual client’s results. Tax treatment depends on your circumstances. Investing involves risk, including loss of principal.