tax loss harvesting

Definition

The practice of selling investments at a loss to offset capital gains and reduce tax liability, then often buying similar assets to maintain market exposure. It's using the tax code's lemons to make lemonade.

Example Usage

Her financial advisor recommended tax loss harvesting to offset the gains from selling her company stock.

Origin

Practice became popular in the 1970s as capital gains taxation and retail investing expanded

Fun Fact

The wash sale rule prevents you from buying the identical security within 30 days, so investors buy similar-but-not-identical assets to maintain their strategy.

Source: Personal tax planning and investment advisory terminology

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