You can offset short-term gains with short-term losses and long-term gains with long-term losses.
For investments you've held for a year or less, short-term capital gains tax rates apply, which are higher than the long-term rates that apply to investments you've sold after holding for longer than a year.Ĭapital losses from tax loss harvesting are treated the same way. For instance, the IRS taxes the profits you earn when you sell a stock or other investment, but different rates apply depending on how long you've owned the investment. The amount of money you can save in taxes through tax loss harvesting depends on your tax bracket and the nature of the income you're trying to offset. How much tax loss harvesting can save you If you have any capital losses left over after entirely offsetting your capital gains, then you can apply up to $3,000 of those remaining losses against other types of income, including wages and salaries.Īlthough many investors use tax loss harvesting strategies toward the end of the year, you can harvest tax losses at any time. The current tax rules allow you to use capital losses to offset an unlimited amount of capital gains. Tax loss harvesting involves selling a losing investment in order to generate capital losses that you can write off on your tax return.
But with tax loss harvesting, you can at least get a tax benefit to help offset some of your losses.
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