What is tax-loss harvesting and how can I use it?

What is tax-loss harvesting and how can I use it?

Tax-loss harvesting is a strategy to offset capital gains taxes by selling investments at a loss. You can use it to reduce your taxable income.

How do I identify which investments to sell for tax-loss harvesting?

Look for investments that have decreased in value since you purchased them. Selling these can help you realize a loss.

Are there any rules I should be aware of when doing tax-loss harvesting?

Yes, be mindful of the wash-sale rule, which disallows claiming a loss if you repurchase the same security within 30 days.

Can I use tax-loss harvesting in retirement accounts?

No, tax-loss harvesting applies only to taxable accounts, as losses in retirement accounts cannot be used to offset gains.

What are the potential risks of tax-loss harvesting?

The main risk is that you might miss out on potential gains if the market rebounds after selling your investments.