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Tax Loss Harvesting: What It Is and How It Works

By Kristi WaterworthUpdated Aug 12, 2025 at 1:53 PM | Fact-checked by Frank Bass

Key Points

  • Tax loss harvesting reduces taxable income by offsetting capital gains with losses from sold investments.
  • Investors must adhere to IRS wash sale rules, avoiding buying similar assets 30 days before and after the sale.
  • You can offset up to $3,000 of income annually with harvested losses, carrying forward any excess.

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