As December 31 approaches, you – or your investment advisor – should review taxable investment accounts for “tax-loss harvesting” opportunities.
Tax-loss harvesting is an important -- but often neglected -- year-end investment strategy. It refers to selling investments that declined in value, which generates capital losses. The IRS doesn’t recognize losses unless you sell the asset.
Those losses are then used to offset capital gains on your tax return. That reduces the taxes you pay and, if losses exceed capital gains, up to $3000 can be used to reduce ordinary income on your tax return.