Tax-Loss Harvesting (Investing)
InvestingGlossary term
Definition
An investment strategy that involves selling securities at a loss to offset capital gains taxes on other investments. The proceeds are typically reinvested in a similar but not identical security to maintain market exposure while capturing the tax benefit.
Related terms
- Capital GainsThe profit realized from selling an asset for more than its purchase price. Capital gains can be short-term (held less than a year) or long-term (held more than a year), with different tax implications.
- Capital LossA loss incurred when selling an asset for less than its purchase price. Capital losses can offset capital gains to reduce tax liability.
- Wash Sale RuleAn IRS rule that disallows claiming a tax loss on a security if you purchase the same or a substantially identical security within 30 days before or after the sale. The disallowed loss is added to the cost basis of the replacement shares.
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