Tax Strategies

The Tax Rules for Your Personal Investments article in AAII's 2025-2026 Tax Guide, highlights something many of us don't realize until we've been investing for a while: timing can be just as important as the investments themselves.

Between ex-dividend dates, holding-period requirements for long-term capital gains, year-end mutual fund distributions, and the ever-tricky wash-sale window, tax rules often influence when we buy, sell, or harvest losses.

But timing cuts both ways. On one hand, delaying a sale by a few days or avoiding a late-December fund purchase can save real money at tax time. On the other hand, letting taxes drive every decision can conflict with your long-term strategy, risk management, or portfolio rebalance schedule.

So, I'm curious:
How do you personally balance tax timing with sticking to your actual investment plan?

Do you:

• Delay sales to qualify for long-term gains?

• Actively track ex-dividend dates or holding-period requirements?

• Avoid buying mutual funds right before distributions?

• Tax-loss harvest but worry about the wash-sale rules?

• Or do you ignore most timing details and let strategy lead the way?

There's no right approach, just different philosophies. Would love to hear how you think about it. Read the full article here.

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Jenna Brashear
AAII Community Manager
Chicago, IL
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@Jenna,

There are many things going on here and as you say there is no right approach, that works all the time.

1. Tax timing as it relates to your 1040 is where I focus on my strategy. My strategy is not to create taxes on money I am not spending, unless there is some very strategic reason to do so.  Filling up the zero % LTCG tax brackets is one of those reasons to sell gains and then buy back right a way, as no wash sales are involved. At over 65 the new wider temporary Senior deduction creates a much bigger zero LTCG window that I plan to use up in December.
2. Definitely make use of LTCG where appropriate, as you mention above.
3. Don't track x-dates, as the price of the investment will fall on the x-date, so whether you "buy ahead of the date" or after has little effect on a long or even short-term holding. Buying ahead of a large dividend payment only means if you sell it shortly thereafter you will be selling at a lower price point. 
4. Tax-loss harvesting can be avoided if you try and buy "solid long-term" companies or ETFs. Selling a solid company is not usually better than buying more of it on a dip or just holding.  You should be mindful that if you have equal LTCG in the zero percent bracket, ST & LT losses will cancel them out, meaning you get no benefit of the loss, because you weren't going to pay tax on the gain in the first place.

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DAVE GILMER
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Dave, thanks for laying out your approach so clearly, it's a great example of how tax strategy can line up with personal goals and filing circumstances.

You're right that a lot of this comes down to individual priorities. Some investors may focus heavily on managing their 1040 outcome each year, while others often lean more on staying fully aligned with their long-term allocation and only adjust for taxes when it meaningfully impacts their plan.

Your point about using the 0% LTCG bracket intentionally is a good example that for some investors a window like that can create very real long-term advantages, while others may not benefit the same way depending on income or account types. The same goes for your note on ex-dividend dates: for long-term holders the price adjustment usually offsets the timing benefit, whereas short-term or high-yield-focused investors may look at it differently.

I also appreciate your reminder about the fact that tax-loss harvesting not always being additive, especially when losses simply offset gains that would have been taxed at 0% anyway. That nuance often gets lost in general discussions about "always harvest losses."

Overall, I think your approach highlights a useful perspective: Tax timing can be a valuable tool, but it works best when it fits within a broader, long-term strategy rather than driving every decision on its own. Appreciate you sharing your thoughts, Dave!

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Jenna Brashear
AAII Community Manager
Chicago, IL
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Original Message:
Sent: 12-04-2025 11:06
From: DAVE GILMER
Subject: How Do You Balance Tax Timing?

@Jenna,

There are many things going on here and as you say there is no right approach, that works all the time.

1. Tax timing as it relates to your 1040 is where I focus on my strategy. My strategy is not to create taxes on money I am not spending, unless there is some very strategic reason to do so.  Filling up the zero % LTCG tax brackets is one of those reasons to sell gains and then buy back right a way, as no wash sales are involved. At over 65 the new wider temporary Senior deduction creates a much bigger zero LTCG window that I plan to use up in December.
2. Definitely make use of LTCG where appropriate, as you mention above.
3. Don't track x-dates, as the price of the investment will fall on the x-date, so whether you "buy ahead of the date" or after has little effect on a long or even short-term holding. Buying ahead of a large dividend payment only means if you sell it shortly thereafter you will be selling at a lower price point. 
4. Tax-loss harvesting can be avoided if you try and buy "solid long-term" companies or ETFs. Selling a solid company is not usually better than buying more of it on a dip or just holding.  You should be mindful that if you have equal LTCG in the zero percent bracket, ST & LT losses will cancel them out, meaning you get no benefit of the loss, because you weren't going to pay tax on the gain in the first place.

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DAVE GILMER
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Do you:

• Delay sales to qualify for long-term gains?

I'm a long-term investor (buy and hold!), so I never incur short-term gains. I occasionally will sell a short-term holding to harvest a tax loss, but not very often. 

• Actively track ex-dividend dates or holding-period requirements?

I track dividend dates just so I know what is coming in and when. It generally has nothing to do with when I buy or sell. 

• Avoid buying mutual funds right before distributions?

I don't buy mutual funds. The only funds I own are low-expense-ratio domestic equity index ETFs (except for three Bitcoin ETFs and a few triple-leveraged ETFs), and none of them have ever given me a big year-end surprise.

• Tax-loss harvest but worry about the wash-sale rules?

If I sell for a tax loss, it's usually because I think I made a mistake in buying the asset in the first place. Thus, I'm not likely to buy it back in the foreseeable future, so I don't worry about the wash-sale rules. 

• Or do you ignore most timing details and let strategy lead the way?

For my own accounts, except for year-end tax-loss harvesting, taxes have little to do with my buy/sell decisions. Qualified dividends more than fill up the zero bracket for long-term gains, so I don't often sell any appreciated assets unless I need the proceeds for expenses. 

For my children's (and other relatives') taxable accounts, I harvest long-term gains so they can take advantage of the zero tax bracket. I always use limit orders, and I apply "first-trade-triggers-second-trade" tools, setting the first trade to sell a penny (or a few) higher than the second (buy) trade. I do that so they don't lose money to exchange fees. There's always a chance the market could get away from me to the upside, but so far, that's never happened. Market prices usually bounce around enough for both trades to execute on the same day (often within seconds), but if the second order doesn't go, I put in a buy order at the same price and make it good till canceled with off-hours trading permitted.

Depending on their financial situation, I might harvest gains throughout the year, or I might wait until near the end of the year. For example, I have a relative who is a college student and doesn't have enough income to be able to buy an ACA medical insurance policy. Unless your income rises above the poverty levels set for Medicaid, you can't buy an ACA policy without getting hammered on the premiums (i.e. no subsidy). Thus, she's relegated to Medicaid. For her, I have to be careful not to harvest more than a few hundred dollars of gain each month, because if her MONTHLY income goes over a certain amount, it can create a huge mess.

I think understanding taxes is essential for successful investing. I've always prepared my own tax returns as well as many others for friends and relatives. The knowledge I've gained from doing that has paid enormous dividends over the years.

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Rob Adams
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