Tax-Loss Harvesting
TaxesSelling investments at a loss to offset capital gains and reduce taxable income, up to $3,000 per year against ordinary income.
Example
Example: Your stock portfolio has $15,000 in gains and $8,000 in losses. By selling the losing positions, you offset $8,000 of gains, paying tax on only $7,000 instead of $15,000. At the 15% long-term capital gains rate, this saves $1,200 in taxes. You immediately reinvest in a similar (but not identical) fund to maintain your market exposure. The IRS wash-sale rule prevents repurchasing the exact same security within 30 days.