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Tax loss harvesting is an investment approach whereby investors purposely sell depreciated investments to receive a capital loss. Such losses are allowed to offset capital gains made in other forms of investments, which would lower the tax payable by the investor. In case losses are more than gains, the amount of up to $3,000 may be deducted to ordinary income each year and the balance of the losses will be carried forward. The strategy assists in smoothing the returns of the portfolio and enhances after-tax performance. Nevertheless, investors should know about the wash-sale regulations, according to which it is impossible to purchase back a significantly similar investment within 30 days. Tax loss harvesting may be a useful tool in long-term tax-efficiency when appropriately used. What Is Tax Loss Harvesting
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