Investing Strategy
Tax-Loss Harvesting Basics for Everyday Investors
Tax-loss harvesting can improve after-tax returns by using realized losses to offset gains. The key is following rules and keeping your investment plan intact.
Potential benefits
- Offsets realized capital gains.
- Can reduce taxable income within IRS limits.
- Creates opportunities for better tax efficiency over time.
Common mistakes to avoid
- Triggering wash-sale violations.
- Taking losses without a replacement strategy.
- Letting tax tactics override portfolio allocation goals.
Practical move: Tax-loss harvesting should support your long-term allocation, not replace it.
Implementation checklist
- Review taxable account positions for unrealized losses.
- Select replacement holdings that maintain exposure without violating rules.
- Document transactions and coordinate with year-end tax planning.