A Smart Tax-Saving Combo: SEP IRA Contributions + Capital Loss Harvesting

Tax season may be over, but smart planning never goes out of style. While many breathe a sigh of relief once returns are filed, the real opportunity for high-impact tax savings begins now.

This post builds on insights recently shared by my colleague Bhairavi Parikh, CPA, who was featured by Intuit for her perspective on effective year-end tax strategies. In her latest contribution, “Stacking capital loss harvesting with a SEP contribution” ((Intuit Accountants, April 18, 2025), she shares a timely and tactical duo to help self-employed individuals and business owners get ahead. Here, expanding on one of her key recommendations: combining capital loss harvesting with SEP IRA contributions to maximize tax savings.

Let’s break the observations down more in this blog.

The Strategic Advantage: Maximizing Tax Benefits

As Bhairavi explains, by combining capital loss harvesting and SEP IRA contributions, tax professionals can address multiple income streams more effectively. Capital loss harvesting enables clients to offset capital gains tax—and if losses exceed gains, up to $3,000 of ordinary income can be deducted.

On the other hand, SEP IRA contributions offer an above-the-line deduction for self-employed individuals, directly reducing their AGI. This dynamic approach not only lowers taxes but also helps reduce the impact of tax-related limitations like the Net Investment Income Tax (NIIT).

By applying this strategy thoughtfully, she notes, clients may even shift into a lower tax bracket—unlocking more favorable tax rates for both ordinary income and long-term capital gains tax.

Why Now?

Even though tax season is behind us, planning for next year starts now. Implementing this strategy outside the tax crunch allows for thoughtful analysis, better investment decisions, and timely action.

As emphasized in Bhairavi’s Intuit piece, “Tax season may end, but the smart strategy is year-round. This is the perfect time to evaluate your portfolio, rework your income, and plan intentionally.”

How to Implement Bhairavi’s Strategy

To bring this tax-saving plan to life, Bhairavi recommends a three-step protocol:

1) Scan for Capital Losses: Review client portfolios for losses that can offset gains or ordinary income.

2) Review SEP IRA Eligibility & Limits: Determine SEP contribution limits based on net income from self-employment or small business.

3) Mind the Calendar: Complete capital loss harvesting by year-end. SEP IRA contributions can go up to the tax filing deadline.

These steps, when combined with a strategic plan, can yield substantial tax savings.

Curious how to implement these strategies? Want a step-by-step guide to make it happen? Check it out here.

Illustrative Scenario

Outcome:

• Taxable Income: Sarah’s overall taxable income is greatly reduced.
• Tax-Deferred Savings: She maximizes her SEP IRA contributions, securing high tax-deferred savings for retirement.

Start Stacking Tax Wins

This powerful strategy of combining capital loss harvesting with SEP IRA contributions isn’t just another tax tip—it’s one of Bhairavi’s go-to approaches for helping self-employed individuals and small business owners take control of their financial future.

By following her lead and implementing this combo now, clients can reduce their taxable income, boost retirement savings, and stay ahead of the next tax year with confidence.

Want the step-by-step implementation guide?

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Neil Narveson Tax Manager

Neil Narveson, a veteran CPA, serves as the Tax Manager for Analytix Solutions, overseeing tax planning and compliance for clients across the United States. With over 20 years of experience in tax accounting, financial management, and business advisory, Neil specializes in providing back-office support for CPA partners. A graduate of the University of Wisconsin-Milwaukee with a BBA in Accounting, he combines technical expertise with a client-focused approach to deliver strategic tax solutions. Neil is passionate about helping businesses optimize their tax processes and achieve financial efficiency.