Tax-Loss Harvesting

Tax-loss harvesting is the practice of selling investments that have fallen in value to realize a loss and offset capital gains tax from other gains. It can lower your tax bill when done properly.

Key points

• Losses offset gains; net losses up to limits may offset ordinary income (rules vary by country).
• Watch wash-sale rules (e.g., in the U.S., you cannot repurchase a “substantially identical” security within 30 days if you want the tax loss).
• Consider transaction costs and timing — tax benefits should outweigh costs.

Guide: Investopedia — Tax-loss Harvesting and a practical walkthrough: Investopedia — How it Works.

← Back to Glossary