GLOSSARY TERM
Tax-Loss Harvesting
Tax-loss harvesting means selling investments at a loss in order to use those losses to offset gains for tax purposes.
What does this mean in practice?
The idea is not simply to realize a loss, but to potentially improve after-tax results. In some countries, realized losses can reduce tax on realized gains elsewhere. The exact rules vary, so the usefulness of this strategy depends on local taxation.
Example
You sell one investment that is down in value and use the realized loss to offset gains from another investment that you sold at a profit. This may reduce the tax you owe.
Why it matters
It is a tax-management tool that can improve after-tax results where the rules allow it. It also shows that taxes are not only about gains, but sometimes also about how losses are handled.
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