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Tax-loss harvesting: a year-end move that can save thousands

How to use losing positions to offset gains — and the wash-sale rule to avoid.

5 min read
Tax-loss harvesting: a year-end move that can save thousands

Sell investments at a loss to offset capital gains, dollar-for-dollar. Up to $3,000 of net loss can also offset ordinary income each year — the rest carries forward indefinitely.

The wash-sale rule: you can't deduct the loss if you buy the 'substantially identical' security within 30 days before or after the sale. Workaround: replace with a similar-but-not-identical fund (e.g., one S&P 500 ETF for another total-market ETF). Then optionally swap back after 31 days.

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