Noon: Individual Tax Tips & Refund Strategies, Capital Gains and Loss Harvesting: A Late-Year Refund Strategy for New Haven Families and Self-Employed Filers

New Haven, Connecticut, Jose’s Tax Service, September 22, 2026

As the year approaches December 31, review your investment transactions before the final trading days of 2026.
Capital gains and capital losses can materially affect your federal tax liability. The right year-end strategy may reduce tax due, preserve a refund, or prevent an unexpected balance.

This is not a recommendation to sell an investment solely for tax reasons. Review investment objectives, holding periods, market conditions, and transaction costs before acting. A tax professional can help coordinate the tax consequences with your broader financial plan.

Understand the 2026 Long-Term Capital Gains Rates!

For federal purposes, an investment is generally treated as long-term when it has been held for more than one year. Property held for one year or less generally produces a short-term gain or loss.

Short-term capital gains are taxed at ordinary income tax rates. Most net long-term capital gains may qualify for the 0%, 15%, or 20% federal rates.

The 2026 thresholds are established by Internal Revenue Service (IRS) Revenue Procedure 2025-32, section 4.03.

These thresholds apply to taxable income, not simply wages, gross receipts, or adjusted gross income (AGI). Ordinary taxable income is generally considered first. Net long-term capital gains are then layered on top.

For example, assume a single filer has $40,000 of taxable income before a potential long-term gain. The 2026 0% capital gains threshold is $49,450. Approximately $9,450 of additional net long-term capital gain may fit within the 0% federal capital gains range, subject to the complete tax calculation.

The 0% rate does not mean the sale is automatically tax-free. State income tax, the Net Investment Income Tax (NIIT), special gain categories, and other limitations may apply.

Consider Gain Harvesting When the 0% Bracket Applies!

Gain harvesting means intentionally selling an appreciated investment to recognize a long-term capital gain during a year when some or all of the gain may qualify for the 0% federal rate.

This strategy may be relevant for:

• Families with temporarily lower taxable income.
• Individuals between jobs or working reduced hours.
• Retirees with limited taxable retirement income.
• Self-employed filers experiencing a slower business year.
• Students or younger investors with modest taxable income.
• Taxpayers who want to reset the basis of an investment.

Use the following process:

1. Project 2026 taxable income. Include wages, self-employment income, interest, dividends, retirement distributions, business income, deductions, and credits.
2. Identify the filing status. The threshold differs for single, married filing jointly, married filing separately, and head of household filers.
3. Calculate available 0% room. Compare projected taxable income with the applicable 2026 threshold.
4. Review the investment’s holding period. Confirm that the asset has been held for more than one year.
5. Estimate state and federal effects. A 0% federal rate may not eliminate Connecticut income tax or other federal taxes.
6. Confirm the transaction. The sale must be executed before December 31, 2026, to generally fall within the 2026 tax year.

A gain realized at 0% may still affect eligibility for income-based credits, financial aid, health insurance subsidies, or other tax calculations. Review the broader effect before executing the sale.

Use Capital Losses to Offset Capital Gains!

Tax-loss harvesting means selling an investment that has declined in value to realize a capital loss. The loss can then be used to offset capital gains under the federal netting rules.

The process generally works as follows:

1. Separate short-term and long-term transactions.
2. Net short-term gains and losses.
3. Net long-term gains and losses.
4. Combine the resulting short-term and long-term amounts.
5. Apply any allowable net loss against ordinary income if losses exceed gains.

Capital losses may offset capital gains dollar for dollar after the required netting process. This can be useful when a taxpayer has:

• A large stock sale.
• A mutual fund or exchange-traded fund distribution.
• A real estate transaction.
• A concentrated investment position.
• A prior-year capital loss carryover.
• A taxable investment account with positions that no longer fit the taxpayer’s objectives.

Losses from personal-use property, such as a personal vehicle or household furniture, generally are not deductible. Do not treat every decline in value as a reportable tax loss. A taxable sale or other recognized disposition is generally required.

Apply the $3,000 Ordinary Income Limitation Correctly!

If total capital losses exceed total capital gains, the deductible excess is generally limited to the lesser of:

• $3,000, or
• The total net capital loss shown on line 16 of Schedule D (Form 1040), Capital Gains and Losses.

The limit is $1,500 for married filing separately taxpayers.

The allowable loss is reported on Form 1040, U.S. Individual Income Tax Return, generally on line 7a. A $3,000 capital loss deduction can reduce ordinary taxable income. It does not create a $3,000 refund.

For example:

• Capital gains: $2,000
• Capital losses: $8,000
• Net capital loss: $6,000
• Current-year ordinary income deduction: $3,000
• Remaining carryforward: $3,000

Unused capital losses generally carry forward to later tax years until fully used. The carryforward retains its short-term or long-term character. Use the Capital Loss Carryover Worksheet in Publication 550, Investment Income and Expenses, or the applicable Instructions for Schedule D.

A carryforward may offset future capital gains without the $3,000 annual limitation. However, the current-year ordinary income deduction remains subject to the applicable limit.

Avoid Wash-Sale Problems!

The wash-sale rule may disallow a loss when you sell stock or securities at a loss and acquire substantially identical stock or securities within 30 days before or 30 days after the sale. The rule can also apply when you acquire an option or contract to purchase substantially identical property.

Use this checklist before harvesting a loss:

• Review purchases made during the 30 days before the sale.
• Suspend automatic dividend reinvestment when necessary.
• Check every taxable brokerage account.
• Review purchases in a spouse’s account.
• Review employer stock plans and recurring investment programs.
• Monitor purchases during the 30 days after the sale.
• Check whether an IRA acquired substantially identical securities.

When the wash-sale rule applies, the loss is generally disallowed for the current year. In many taxable-account situations, the disallowed loss is added to the basis of the replacement shares. The tax benefit is deferred until the replacement shares are sold in a transaction that does not create another wash sale.

IRA transactions require special care. A replacement purchase in an IRA may produce a disallowed loss without the same basis adjustment available in a taxable account. Do not rely solely on the broker’s year-end statement. Broker reporting may not identify every related-account transaction.

Report Transactions on the Correct IRS Forms!

Most individual taxpayers with reportable investment sales use the following forms:

1. Form 1099-B, Proceeds From Broker and Barter Exchange Transactions
   Obtain this from your broker when issued. It generally reports sales proceeds, basis, dates, and certain adjustments.

2. Form 8949, Sales and Other Dispositions of Capital Assets
   List applicable transactions, reconcile broker information, and report adjustments such as wash-sale amounts, selling expenses, or incorrect basis.

3. Schedule D (Form 1040), Capital Gains and Losses
   Summarize totals from Form 8949, calculate net short-term and long-term gains or losses, and apply the capital loss limitation.

The IRS explains that the subtotals from Form 8949 flow to Schedule D, where the overall gain or loss is calculated. Review the official IRS guidance for Form 8949 and IRS guidance for Schedule D.

Also review IRS Topic No. 409, Capital Gains and Losses and Publication 550. These resources explain holding periods, basis, capital loss carryovers, wash sales, and reporting requirements.

Complete This Year-End Harvesting Checklist!

Before December 31, complete the following steps:

• Download current investment activity from each brokerage account.
• Identify unrealized gains and losses.
• Confirm each asset’s purchase date and adjusted basis.
• Separate short-term from long-term positions.
• Estimate realized gains already reported during 2026.
• Review prior-year capital loss carryovers.
• Project taxable income and the applicable 0%, 15%, or 20% capital gains range.
• Review potential wash-sale transactions.
• Check automatic purchases and dividend reinvestments.
• Execute desired trades before the December 31 market deadline.
• Confirm that orders were executed, not merely entered.
• Save trade confirmations and year-end statements.
• Provide Form 1099-B and related records to your tax preparer.

For most publicly traded securities, the trade date controls the tax year. Do not wait until the final minutes of December 31. Market holidays, early closures, order delays, and execution issues can affect the result.

Coordinate Investment Planning With Self-Employment Income!

Self-employed individuals should include investment transactions in their broader year-end tax projection. Capital gains generally are not subject to self-employment tax, but they can increase total taxable income and affect estimated tax requirements.

Before year-end, review:

• Net business profit through the latest completed month.
• Fourth-quarter income and expenses.
• Federal and Connecticut estimated payments.
• Withholding from other household income.
• Capital gains and losses.
• Retirement contributions.
• The potential 3.8% Net Investment Income Tax (NIIT) for higher-income taxpayers.

Capital gains may create an estimated tax obligation even when no tax is withheld from the transaction. Underpayment penalties may apply when required estimated payments are not made on time.

Plan Before December 31!

Capital gain harvesting and tax-loss harvesting can be effective components of a year-round tax plan. They require accurate basis information, careful income projections, wash-sale monitoring, and timely execution.

The strategy may reduce federal tax, offset other gains, or preserve a refund. It does not guarantee a refund. A refund depends on the relationship between total tax liability and withholding or estimated payments.

Jose’s Tax Service provides year-round tax planning for New Haven families, self-employed individuals, and virtual clients outside Connecticut. Appointments are available virtually or in person, including same-day availability, with $0 upfront payment. Review your 2026 investment activity before the December 31 deadline by visiting the Jose’s Tax Service appointment page or requesting a quote.

Category: Tax Planning | Tags: tax refund, personal finance, IRS tips, New Haven taxes