What are the tax implications of harvesting losses?

What are the tax implications of harvesting losses?

Harvesting losses, or tax-loss harvesting, involves selling securities at a loss to offset capital gains. This can reduce your taxable income.

How does it work in practice?

In practice, you sell investments that have lost value, then you can use those losses to offset gains from other investments, potentially lowering your tax bill.

Are there any limits to how much I can offset?

Yes, you can offset capital gains with losses, but if your losses exceed your gains, you can only deduct up to $3,000 against other income per year.

What happens to the remaining losses?

Any remaining losses can be carried forward to future tax years, allowing you to offset gains in those years.

Is there a specific time I should consider harvesting losses?

It's often beneficial to consider harvesting losses towards the end of the tax year, especially if you have realized gains.