Tax-loss harvesting means selling investments that have dropped in value so that the loss on paper cancels out — or “offsets” — gains you’ve made elsewhere in your portfolio, reducing the taxes you owe the IRS. For retirees and near-retirees in 2026, doing this in July rather than waiting until December gives you six extra months to reinvest, rebalance, and plan around other retirement income rules that affect your tax bill. Done right, it can save hundreds or even thousands of dollars — without changing your long-term investment strategy.
What exactly is tax-loss harvesting, and how does it work?
When you sell an investment for less than you paid for it, you realize a “capital loss.” The IRS lets you use that loss to cancel out capital gains — profits from selling other investments that went up. If your losses exceed your gains, you can use up to $3,000 of the leftover loss to offset ordinary income (like wages, pension payments, or IRA withdrawals), and carry any remaining loss forward into future tax years.
Here’s a simple example: Say you sold some stock in April for a $4,000 profit. You also hold a bond fund that’s down $3,500 from what you paid. If you sell that bond fund now, your net taxable gain drops from $4,000 to just $500. That’s real money back in your pocket.
One important rule to know: the wash-sale rule. The IRS won’t allow the loss if you buy the same — or a “substantially identical” — investment within 30 days before or after the sale. The fix is simple: wait 31 days, or swap into a similar-but-not-identical fund to keep your market exposure.
Why does July matter more than December for retirees?
Most people think of tax-loss harvesting as a December scramble. But harvesting in July gives you a clearer picture of your full-year income — Social Security payments, Required Minimum Distributions (RMDs), part-time earnings, and any big one-time events like a home sale. That matters enormously for retirees because your total income determines:
- How much of your Social Security is taxable (up to 85% can be taxed depending on your “combined income”)
- Whether you trigger Medicare IRMAA surcharges (extra monthly premiums if your income crosses certain thresholds)
- Your capital gains tax rate (0%, 15%, or 20% depending on taxable income)
By mid-July, you have roughly six months of real income data. You can estimate your year-end total and make smarter moves now rather than guessing in December.
How much of Social Security is taxable, and can harvesting help?
The IRS taxes Social Security based on your “combined income,” which is your adjusted gross income plus non-taxable interest plus half of your Social Security benefit. If that total is between $25,000 and $34,000 for single filers (or $32,000–$44,000 for married couples filing jointly), up to 50% of your benefit is taxable. Above those upper limits, up to 85% is taxable.
Tax-loss harvesting reduces your adjusted gross income, which can pull your combined income down — potentially pushing you into a lower Social Security tax bracket. Even trimming $2,000–$3,000 from your taxable income can make a meaningful difference.
Enjoying this? Subscribe to Silver & Cents — it's free.
What are the RMD rules for 2025 and 2026, and how do they affect harvesting?
Required Minimum Distributions — the amounts the IRS forces you to withdraw from traditional IRAs and most workplace retirement accounts each year — are a major income driver for retirees. Under current rules (confirmed for 2025 and continuing into 2026), RMDs begin at age 73. The amount is calculated by dividing your account balance by an IRS life-expectancy factor.
Here’s the catch: RMDs are taxed as ordinary income. A large RMD can push your total income up, making more of your Social Security taxable and possibly triggering Medicare IRMAA surcharges. Tax-loss harvesting your taxable (non-retirement) brokerage account won’t reduce RMD income directly — RMDs come from tax-deferred accounts — but it can offset capital gains you trigger elsewhere, keeping your overall tax picture cleaner.
If you haven’t taken your 2026 RMD yet, factor it into your income estimate before you harvest. The goal is to see the full picture.
How do I avoid Medicare IRMAA surcharges when managing investment income?
IRMAA stands for Income-Related Monthly Adjustment Amount. It’s the extra premium Medicare charges higher-income beneficiaries on top of the standard Part B premium (which is $185.00 per month for 2025, with 2026 rates adjusted slightly upward). IRMAA kicks in when your income from two years prior crosses set thresholds — for 2026 premiums, Medicare looks at your 2024 tax return.
This two-year lookback means the harvesting you do in 2026 affects your 2028 Medicare premiums. It also means that if you had a high-income year in 2024 — a Roth conversion, a home sale, a large RMD — your 2026 premiums may already be elevated. If so, reducing your 2026 taxable income through tax-loss harvesting helps protect your 2028 premiums.
IRMAA surcharges can add $594 to over $4,000 per person per year depending on income tier. That’s a powerful reason to keep your income as tidy as possible.
When should you claim Social Security to maximize your benefit?
This isn’t directly a harvesting question, but it connects: the timing of your Social Security claim shapes your taxable income for years. Claiming early (as young as 62) gives you a permanently reduced benefit. Waiting until 70 earns you the maximum — about 76% more per month than claiming at 62. Each year you delay past your full retirement age (67 for most people born after 1960) adds roughly 8% to your monthly benefit.
If you’re still in the “should I claim now?” decision window, consider how your other income sources — RMDs, investment income, part-time work — interact with Social Security. A tax advisor can model the scenarios. Tax-loss harvesting is one tool that gives you more flexibility to delay claiming by keeping your non-Social-Security income tax-efficient in the meantime.
Three steps to start tax-loss harvesting this July
- List your taxable accounts — not your IRAs or 401(k)s, which have different tax rules. Tax-loss harvesting applies to regular brokerage accounts.
- Identify positions in the red — look for holdings currently worth less than what you paid (your “cost basis”). Your brokerage statement should show this.
- Check your year-to-date gains — before selling anything, know how much in gains you’ve already realized this year. That tells you how much you actually need to offset.
If the math feels complicated, a fee-only financial advisor or CPA can run the numbers in under an hour. The potential savings are almost always worth the conversation.
Silver & Cents delivers daily money moves built for the golden years — practical, plain-English financial guidance for adults 50 and over.
Enjoying this? Subscribe to Silver & Cents — it's free.
Frequently Asked Questions
When should I claim Social Security to maximise my benefit?
The longer you wait to claim — up to age 70 — the higher your monthly benefit. Delaying past your full retirement age (67 for most people born after 1960) adds about 8% per year to your benefit, so waiting from 67 to 70 increases your monthly check by roughly 24%. The right time depends on your health, other income sources, and whether you need the money now.
How much of my Social Security benefit is taxable?
Between 0% and 85% of your Social Security benefit can be taxed, depending on your “combined income” (adjusted gross income + nontaxable interest + half your Social Security). Single filers with combined income above $34,000 and married couples above $44,000 may have up to 85% of their benefit subject to federal income tax. Reducing other taxable income — through strategies like tax-loss harvesting — can lower this percentage.
What are the RMD rules for 2025 and 2026?
Under current law, Required Minimum Distributions from traditional IRAs and most employer retirement plans must begin at age 73. The annual amount is calculated by dividing your prior year-end account balance by an IRS life-expectancy factor. Failing to take your RMD triggers a 25% penalty on the amount you should have withdrawn, so mark the deadline — December 31 each year — on your calendar.
How do I avoid Medicare IRMAA surcharges?
IRMAA surcharges are added to your Medicare Part B and Part D premiums when your income from two years prior exceeds certain thresholds. To avoid them, manage your taxable income carefully in the years that will be reviewed — for example, spread Roth conversions over multiple years, time large withdrawals strategically, and use tax-loss harvesting to offset capital gains. If your income drops significantly due to a life event, you can appeal your IRMAA determination using Form SSA-44.
What is the Medicare Part B premium for 2025?
The standard Medicare Part B premium for 2025 is $185.00 per month. Higher-income beneficiaries pay more through IRMAA surcharges, which can push the monthly premium to $628.90 or more depending on income tier. The 2026 premium will be announced by CMS in late 2025 and typically reflects healthcare cost adjustments.