Tax, fees & accounts
Tax-loss harvesting
Selling a losing holding to realise the loss and offset it against taxable gains.
How it works
Realising a loss can reduce tax owed on gains elsewhere, and in some systems a limited amount can be set against ordinary income or carried forward.
The proceeds are usually reinvested in something similar but not identical, to keep market exposure while capturing the tax benefit.
Where it misleads people
Wash-sale rules disallow the loss if you buy the same or a substantially identical security within a defined window. Buying back too quickly forfeits the entire benefit.
Related terms
- Wash saleA rule disallowing a tax loss when you repurchase the same security too soon after selling.
- Capital gains taxTax on the profit made when you sell an investment for more than you paid.
- Realised profit and lossGains and losses that have been locked in by selling, as opposed to those still on paper.
- Tax lotOne purchase of a security, tracked separately with its own date and price.
Mentioned in
More in Tax, fees & accounts
- Tax wrapper
- Withholding tax
- Stamp duty
- Average cost
- Platform fee
- Income tax on investments
- Currency conversion fee
- FIFO and other lot methods
All 11 Tax, fees & accounts terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.