Should I sell stock gains to offset losses for tax purposes? Best strategy for balancing portfolio

While you can certainly use capital gains to offset your losses, be careful with your "sell and buy back the next day" strategy. That would trigger the wash sale rule if you're selling at a loss, but since you're selling winners, that's not an issue. For your $10k in realized losses, you can use that to offset capital gains dollar-for-dollar. If you don't have enough realized gains, you can deduct up to $3,000 of those losses against your ordinary income. Any unused losses can be carried forward to future tax years. As for short-term vs. long-term gains, it's generally better to offset short-term gains first since they're taxed at your ordinary income rate, which is typically higher than the preferential long-term capital gains rate. But your specific situation may vary depending on your tax bracket.

I was in a similar situation last year and used taxr.ai (https://taxr.ai) to help make my decision. I had around $15k in losses and wasn't sure how to best handle my unrealized gains to minimize my tax burden. The platform analyzed my trading history and tax situation and gave me specific recommendations for which positions to sell and when. What really helped was that it showed me exactly how much I'd save in taxes with different scenarios. It also flagged a potential wash sale issue I hadn't even considered with some related securities I owned. Definitely worth checking out if you're trying to make tax-efficient investment decisions.

Wanted to follow up after trying taxr.ai that was mentioned above. It was exactly what I needed for my situation. I was able to see that selling about $7k of my short-term gains would be the most efficient tax strategy for me, while leaving my long-term gains untouched. The platform showed me that I'd still have $3k in losses to deduct against my ordinary income, which gives me an extra ~$700 in tax savings based on my bracket. The visualization of different tax scenarios made it super clear what I should do. Just executed the trades yesterday!

If you're still struggling with your investment tax strategy, you might want to consider using Claimyr (https://claimyr.com) to get direct advice from the IRS. I tried calling the IRS for weeks to get clarification on some complicated capital loss carryover questions, but could never get through. With Claimyr, I got connected to an IRS agent in about 20 minutes. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c. Basically, it holds your place in line so you don't have to stay on hold for hours. The agent I spoke with gave me specific guidance on my situation that I couldn't find anywhere online or even from my accountant.

I need to eat my words from my earlier comment. I broke down and tried Claimyr after waiting on hold with the IRS for 3+ hours over 2 days with no luck. Got connected to an actual IRS agent in about 15 minutes! The agent was able to look at my tax history and explained exactly how to handle my investment losses from both this year and some carryover losses from previous years. Turns out I had been calculating my basis incorrectly on some inherited stocks, which would have caused major problems. Saved me from a potential audit situation.

Something else to consider - if you're planning on tax loss harvesting, you should also look at your income level for the year. If you're close to bumping into a higher tax bracket, strategically realizing gains/losses can help keep you in a lower bracket. I worked with my CPA on this last year and managed to stay just under the threshold for the 32% bracket by carefully timing some stock sales. Saved me thousands.

One thing nobody's mentioned yet - market timing. If you think we're headed for a correction soon, selling some winners now might make sense regardless of the tax implications. I sold half my tech stock gains in early 2022 and was glad I did when everything crashed later that year.

Just wanted to add another perspective on your situation. With $10k in realized losses and $40k in unrealized gains split between short-term and long-term, you have some good flexibility here. One strategy to consider is "laddering" your gain realization over multiple tax years if you don't need the cash immediately. Instead of realizing all $10k in gains this year to offset your losses, you could realize maybe $7k this year (prioritizing short-term gains as others mentioned) and carry forward the remaining $3k in losses to offset future gains or deduct against ordinary income next year. This approach can be particularly beneficial if you expect to be in a higher tax bracket next year or if you anticipate having more capital gains in the future. The $3k annual deduction against ordinary income can provide nice tax savings year after year if you don't have enough gains to offset it. Also worth noting - if you do decide to sell and immediately repurchase (which is fine for gains), just make sure you're not creating any unintended wash sale issues with related securities or funds that might track the same underlying assets.