Tax Loss Harvesting

Tax loss harvesting is a strategy used by investors to reduce their taxable income by selling investments that have lost value. When an asset is sold at a loss, this loss can offset gains made from other investments, thereby lowering the capital gains tax owed. For example, if you sold one stock for a $1,000 gain and another for a $500 loss, the loss could reduce your taxable gain to $500. This approach helps maximize tax efficiency by strategically recognizing losses to reduce tax liabilities while potentially reinvesting in similar assets to maintain market exposure.