Tax Loss Harvesting

In tax-loss harvesting, you book losses and offset gains in any other instrument to reduce your tax liability.

They can choose to take the loss so that it can offset taxes owed on income, whether from a capital gain or even income from other sources

Tax-loss harvesting only defers tax payments and in some cases it does not cancel the tax liability also.

If an investor has no capital gains to offset in the year the capital loss was “harvested,” the loss can be carried over to offset future gains or future income.

Not only can capital losses offset capital gains, but if losses exceed gains that year the investor could also use the remaining capital-loss balance to offset personal income (up to a limited amount) and perhaps even carry the loss over to offset gains in future years.

Although tax-loss harvesting can be done throughout the year, actually it has to be done throughout the year instead of once in the year, but many generally do the most common time is year-end.

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