Tax-loss harvesting is a sophisticated tax-minimization strategy that allows you to turn investment losses into tax savings. It involves selling investments that have declined in value, using those losses to offset taxable capital gains in your portfolio.
The Offsetting Rules and the Wash Sale Limit
If your capital losses exceed your capital gains, you can use up to $3,000 of the remaining losses to offset ordinary income on your federal tax return. Any remaining losses can be carried forward to future tax years indefinitely.
However, you must avoid the "Wash Sale Rule." This rule states that you cannot buy the same or a "substantially identical" security within 30 days before or after the sale. If you do, the tax deduction is disallowed, and the loss is added to the cost basis of the new stock.
Run your own numbers
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