What is tax-loss harvesting and how does it work?
An example of an AI chatbot conversation about tax-loss harvesting and its benefits.
What is tax-loss harvesting and how does it work?
Tax-loss harvesting is a strategy used to offset capital gains taxes by selling securities at a loss. This can reduce your taxable income.
What types of investments can I use for tax-loss harvesting?
You can use stocks, bonds, mutual funds, and ETFs for tax-loss harvesting. Just ensure they are in a taxable account.
Are there any risks associated with tax-loss harvesting?
Yes, risks include the potential for missing out on market gains if you sell too early and the wash-sale rule, which can disallow the loss.
How much can I save on taxes with this strategy?
The savings depend on your capital gains and tax bracket. Generally, offsetting losses can save you a significant amount on taxes.
Can I carry over losses to future years?
Yes, if your losses exceed your gains, you can carry over the remaining losses to future tax years.
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