Definition
What is tax-loss harvesting?
Tax-loss harvesting is the practice of selling an investment that has lost value to realize a capital loss, then using that loss to offset capital gains — and a limited amount of ordinary income — on your tax return. The proceeds are typically reinvested to keep your portfolio’s strategy intact.
Harvested losses can offset gains you realize elsewhere in the portfolio, reducing the tax you owe. Unused losses can be carried forward to future years.
The IRS “wash-sale rule” prevents you from claiming the loss if you buy back the same or a substantially identical security within 30 days, so harvesting has to be done carefully to preserve both the tax benefit and your market exposure.
Related terms
This definition is for educational purposes only and does not constitute investment, tax, or legal advice. Rules and thresholds change; consult a qualified professional about your situation.