What Is Tax-Loss Harvesting? Tax-loss harvesting is the practice of selling investments that have experienced a loss to offset capital gains taxes on other investments. How It Works When you sell an investment at a loss, you can use that loss to offset gains from other investments. If your losses exceed your gains, you can use up to $3,000 per year to offset ordinary income. Key Considerations The Wash-Sale Rule: You cannot buy a substantially identical security within 30 days before or after the sale. However, you can invest in a similar (but not identical) investment to maintain your market exposure. Long-Term vs. Short-Term: Losses are first applied against gains of the same type. Short-term losses offset short-term gains first, and long-term losses offset long-term gains first. When to Consider Tax-Loss Harvesting During market downturns when many positions may be at a loss At year-end as part of your annual tax planning When rebalancing your portfolio When you have significant capital gains to offset