<h1>Understanding Tax-Loss Harvesting and Its Benefits</h1>
Tyler?
Yep.
Looks like you sold some stock and made $50,000 of long-term capital gains this year?
Yep.
Okay, so we'll take our long-term capital gains tax.
Uh-uh. Nothing.
Capital gains are taxed at a lower rate, but they're still taxed.
Oh, no. I also sold some of my stocks that didn’t do so well and locked in a long-term capital gains loss of $53,000.
Is this just some secret of the rich?
No, we can all do it. It’s called tax-loss harvesting. Sell losing stocks and use them to offset my winners.
Well, why did you lock in an additional $3,000 loss?
Because if the losses are greater than the gains, I can use them to offset up to $3,000 of my regular income.
Sounds tricky.
Oh, it is. That’s why I follow Social Cat. He makes complex finance seem easy.