What is Tax Loss Harvesting?
Tax loss harvesting is a financial strategy designed to offset taxes that would apply to capital gains earned during the tax period. The strategy usually focuses on gains created by short-term investments, since many countries tax capital gains on these types of investments at a slightly higher rate than gains earned by long-term investments. While tax loss harvesting is a workable and legal strategy in many nations, there are usually some limitations on how the harvesting approach can be utilized. In order to create the tax loss, it is necessary to sell a short-term security at a loss, effectively creating a capital loss on that investment. The capital losses that are experienced by the sale help to offset the capital gains earned on a different short-term investment. This tax loss harvesting strategy will only work if the capital gains and the capital losses take place within the same taxation period. While the tax loss harvest does help to minimize taxes, the process does also reduc
