Tax-Loss Harvesting – Turn Investment Losses Into Tax Savings

Tax-Loss Harvesting — Make Losses Work for You

Tax-loss harvesting means selling investments at a loss to offset capital gains and reduce your tax bill.

How It Works

You have $10,000 gain from selling Stock A. You also have Stock B sitting at $8,000 loss. Sell Stock B → offset $8,000 of gains. Taxable gain = only $2,000 instead of $10,000.

Rules

You can offset unlimited gains with losses. If losses exceed gains, deduct up to $3,000 against regular income. Remaining losses carry forward to future years — indefinitely. Beware the wash-sale rule: cannot buy the same or substantially identical security within 30 days.

Potential Savings

$10,000 in harvested losses × 24% tax rate = $2,400 in tax savings. Over a 30-year investing career, disciplined harvesting can add 0.5-1% annually to after-tax returns.