Tax Loss Harvesting: A Strategy to Reduce Taxes on Investment Gains
Tax loss harvesting is a strategy used by investors to reduce their tax liability on investment gains.
This involves selling securities that have experienced a loss to offset the gains made by other securities in the portfolio.
The losses can be used to offset gains made in the same year or carried forward to offset gains in future years.
Tax loss harvesting can be done throughout the year, but it is most commonly done towards the end of the year.
The benefits of tax loss harvesting include reducing tax liability, increasing after-tax returns, and improving portfolio diversification.
However, it is important to be aware of the wash sale rule, which prohibits investors from buying back the same or substantially identical securities within 30 days of selling them.
How to Tax Loss Harvest ?