In recent years, the phrase “Big Beautiful Bill” has taken on a very specific meaning. It’s now shorthand for the One Big Beautiful Bill Act, signed into law in 2025, which made sweeping changes to the tax code that continue to shape retirement planning in 2026 and beyond. While much of the public conversation has focused on tax rates and deductions, one quieter strategy has become even more important for retirees navigating this new landscape: tax loss harvesting.
Understanding how tax loss harvesting works—and how it interacts with the Big Beautiful Bill—can help retirees manage taxes, control healthcare costs, and keep more of their hard-earned savings working for them.
Tax loss harvesting is an investment strategy that involves selling investments that are currently at a loss in order to offset taxable gains elsewhere in your portfolio. When you realize a loss, that loss can be used to reduce capital gains from profitable investments and, in some cases, reduce ordinary income as well. Think about this as a way to turn a “bad” investment into a “good” discount on your taxes.
The goal isn’t to abandon your long-term investment strategy. Instead, tax loss harvesting is typically paired with reinvesting the proceeds into a similar (but not identical) investment so your overall asset allocation remains intact. Used thoughtfully, it’s a way to turn temporary market downturns into long-term tax advantages.
Not all capital gains are taxed the same way. Short-term capital gains apply to investments held for one year or less and are taxed at ordinary income tax rates. For retirees in higher brackets, that can mean paying as much as 37 percent in federal taxes on those gains.
Long-term capital gains apply to investments held for more than one year and are taxed at lower, preferential rates. For many retirees, these rates are significantly more favorable, which is why holding investments long term is often encouraged in retirement planning.
Think of tax loss harvesting as a kind of “tax coupon” for your investments. When you sell a stock or fund at a loss, you can use that loss to cancel out gains elsewhere—especially short-term gains, which the IRS taxes at higher rates. By wiping out those expensive short-term gains first, you reduce the overall tax you owe. The benefit is that you keep more of your money working for you, rather than sending it to Uncle Sam, and you gain flexibility to rebalance your portfolio or adjust your investments without triggering a big tax bill.
For retirees, taxes don’t just affect how much you owe in April. They influence cash flow, Medicare premiums, and eligibility for deductions and credits. Many retirees rely on taxable investment accounts to supplement Social Security or pension income, which means capital gains are a regular part of their financial picture.
Tax loss harvesting can help smooth out taxable income from year to year. By offsetting gains, you may be able to rebalance your portfolio, raise cash for spending needs, or adjust your risk levels without triggering unnecessary taxes. Keeping your income lower can help you avoid crossing thresholds that increase Medicare premiums or phase out valuable deductions as well.
The One Big Beautiful Bill Act made the 2017 tax cuts permanent, locking in seven tax brackets and keeping the top rate at 37 percent. For retirees with significant assets, this makes managing taxable income more important than ever. Offsetting short-term gains through tax loss harvesting remains one of the most effective ways to avoid paying top-tier rates unnecessarily.
The Bill also introduced an expanded deduction for seniors, sometimes referred to as a “senior bonus.” While helpful, many of these new benefits come with income thresholds. Tax loss harvesting can help reduce adjusted gross income, making it easier for retirees to qualify for these deductions and get the full benefit the law intended.
Another key consideration is Medicare. The Bill adjusted how certain income is calculated for Medicare premium surcharges, referred to as your Income-Related Monthly Adjustment Amount, or IRMAA. Selling appreciated investments can push income high enough to trigger higher premiums. Harvesting losses alongside gains may help keep reported income below these thresholds, avoiding what often feels like a “tax on top of a tax.”
Taken together, the Big Beautiful Bill didn’t reduce the importance of tax planning in retirement—it amplified it. Strategies like tax loss harvesting now play a bigger role in coordinating investment decisions with taxes, healthcare costs, and long-term retirement goals.
Tax loss harvesting isn’t about timing the market or chasing loopholes. It’s about being intentional with your investments and understanding how today’s tax rules affect tomorrow’s retirement income. In a world shaped by the Big Beautiful Bill, retirees who proactively manage gains and losses may find they have more flexibility, lower taxes, and fewer surprises along the way.
If you’d like to learn how strategies like tax loss harvesting fit into a broader retirement plan, consider attending one of our retirement seminars or webinars, hosted by experienced financial advisors who can assist you with all of your retirement planning needs.
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