Tax-Loss Harvesting: A Smart Investing Strategy for Portfolio Management

If you have realized gains this year, you may have the opportunity to offset some or
all of them through tax-loss harvesting. This is a technique you can use to proactively harvest available losses to offset gains by selling depreciated securities, which can be a tremendously helpful portfolio management tool.

It’s slightly counterintuitive – after all, you’re supposed to sell high, right? But the idea is not to eliminate exposure entirely; it’s only a temporary sale to reduce your tax bill, after which you buy back the same stock. In most years, tax loss harvesting has helped many investors harvest enough losses to offset all gains incurred and even hit the maximum deduction amount ($3,000).

Watch our video to learn how tax-loss harvesting works.

To learn more about optimizing your taxes, download Personal Capital’s free tax guide.