Tax Gain/Loss Harvesting


DEFINITION of 'Tax Gain/Loss Harvesting'

Selling securities at a loss to offset a capital gains tax liability. Tax gain/loss harvesting is typically used to limit the recognition of short-term capital gains, which are normally taxed at higher federal income tax rates than long-term capital gains.

Also known as "tax-loss selling".

BREAKING DOWN 'Tax Gain/Loss Harvesting'

For many investors, tax gain/loss harvesting is the single most important tool for reducing taxes now and in the future. If properly applied, it can save you taxes and help you diversify your portfolio in ways you may not have considered. Although it can't restore your losses, it can certainly soften the blow. For example, a loss in the value of Security A could be sold to offset the increase in value of Security B, thus eliminating the capital gains tax liability of Security B.

  1. Capital Loss

    The loss incurred when a capital asset (investment or real estate) ...
  2. Realized Loss

    A loss is recognized when assets are sold for a price lower than ...
  3. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  4. Capital Loss Carryover

    The net amount of capital losses that aren't deductible for the ...
  5. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
  6. Capital Gains Treatment

    The specific taxes assessed on investment capital gains as determined ...
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