What Is Tax Loss Harvesting?
Tax loss harvesting is the process of selling investments at a loss to offset gains elsewhere in your portfolio. It can lower your taxable income and reduce investment taxes.
When It Makes Sense
This strategy is most useful when you have gains to offset or expect higher taxes in the current year. It is a thoughtful way to manage the timing of investment income.
Wash Sale Rule Basics
Be careful with the wash sale rule, which disallows a loss deduction if you repurchase the same or substantially identical security within 30 days. Plan transactions carefully to avoid this trap.
Carrying Losses Forward
If your losses exceed gains, you can use up to $3,000 per year against ordinary income. Excess losses carry forward indefinitely.
Combine with Long-Term Planning
Use our calculators to see how tax-loss harvesting affects your year-end taxes and long-term portfolio growth. It shouldn’t drive your investment decisions, but it can improve after-tax returns.