Some farmers harvest corn. Others: wheat. Still, others: Maybe soybean.
And then there are those who harvest their losses on investments.
Ahhhhh! My beautiful acreage ready to be harvested.
Tax-loss harvesting happens when you sell an investment that’s experienced a loss in order to offset taxes on your capital gains and income.
That’s right. It’s buying high and selling low (aka the exact opposite of common sense and decency).
Of course, there’s a bit more to it than that. Let’s break down exactly what it means, how to do it, and whether it’s right for you.
But first, a quick lesson on everyone’s favorite topic: Capital gains and losses.
How capital gains and losses work
At the crux of tax-loss harvesting are capital gains and losses.