Tax-Loss Harvesting

When investments lose value, the tax code offers a silver lining. Tax-loss harvesting means selling losing investments to offset gains — reducing your tax bill.

Lost $5,000 on one stock and gained $8,000 on another? Sell the loser and you're only taxed on $3,000 net gain.

If your losses exceed your gains, you can deduct up to $3,000 in net losses against ordinary income each year. Unused losses carry forward indefinitely. One catch: the wash sale rule bars you from claiming the loss if you buy the same or a "substantially identical" security within 30 days.