Selling a losing investment can reduce taxable capital gains
Up to $3,000 in losses can offset ordinary income each year
Unused losses can carry forward indefinitely
Wash sale rule prohibits repurchasing the same asset within 30 days
Opinion
Tax loss harvesting is an accessible and effective way for investors to turn portfolio losses into tax savings, helping improve long-term returns.
Core Sell Point
Tax loss harvesting transforms losses into a strategic asset—a must-have skill for smart investors who want to save on taxes and stay invested for the long run.
❓What Is Tax Loss Harvesting?
Not every investment results in a profit—and that's okay. When you handle losses strategically, they can work in your favor—by reducing your tax bill. This approach is known as Tax Loss Harvesting.
In simple terms, it's the strategy of selling losing investments to offset the taxes on your gains.
📌 How Does It Work?
Here’s a simple breakdown:
Let’s say you invest $10,000 each in Stock A and Stock B.
Stock A performs well and is now worth $20,000—a $10,000 gain
Stock B, unfortunately, drops to $5,000, resulting in a $5,000 loss
If you sell both investments:
Normally, the $10,000 gain from Stock A would be taxable.
But the $5,000 loss from Stock B can offset that gain, reducing your taxable gain to $5,000.
👉 That means you just cut your capital gains tax bill in half!
If your losses exceed your gains, you can even carry forward the unused losses to reduce taxes in future years.
🚨 Important Rule: The ‘Wash Sale’
There’s one critical rule to remember: the Wash Sale Rule.
This rule prevents you from claiming a tax loss if you buy the same or a substantially identical investment within 30 days before or after the sale.
For example, if you sell Samsung Electronics at a loss and repurchase it 14 days later, the IRS will disallow the tax loss. So you must avoid buying the same asset for at least 30 days after selling it.
🧐 Who Can Benefit from This Strategy?
Anyone facing a high tax bill due to large capital gains
Investors holding losing positions they’re ready to part with
Those using taxable accounts (This strategy doesn’t apply to tax-advantaged accounts like IRAs or 401(k)s)
🔍 3 Easy Steps to Start Tax Loss Harvesting
Identify and sell underperforming assets to realize the loss
Use the loss to offset capital gains—and even up to $3,000 in ordinary income annually
Reinvest in a similar but not identical stock or ETF to maintain your portfolio allocation
It’s a simple but powerful strategy to reduce taxes and keep your investments growing.
📋 Quick Summary
You can use investment losses to reduce taxes on gains from other investments.
Up to $3,000 in excess losses can be applied to ordinary income annually.
Unused losses can be carried forward to future tax years.
Avoid buying the same or similar investment within 30 days—that’s the wash sale rule.
Tax loss harvesting is an easy, smart strategy that turns losses into tax-saving opportunities—helping boost long-term investment returns.
[Compliance Note]
All posts by Sellsmart are for informational purposes only. Final investment decisions should be made with careful judgment and at the investor’s own risk.
The content of this post may be inaccurate, and any profits or losses resulting from trades are solely the responsibility of the investor.
Core16 may hold positions in the stocks mentioned in this post and may buy or sell them at any time.
