◈ GLOSSARY · INVESTING
Tax-Loss Harvesting.
A definition, in plain English — with the books that teach it.
Reviewed by ClearValue Editorial Team · Jun 27, 2026
◈ DEFINITION
What it means
Definition
Selling investments at a loss to offset realized capital gains (and up to $3,000 of ordinary income per year), then redeploying the proceeds into a similar — but not substantially identical — position. Done right, it can trim a real number off your tax bill without changing your overall market exposure. Done sloppy, it triggers a wash sale and disallows the loss.
◈ IN PRACTICE
Example
You have $10,000 of realized gains for the year and an unrealized loss of $8,000 on an S&P 500 ETF. Sell the ETF, immediately buy a different broad-market ETF (a total-market fund, for example), and the $8,000 loss now offsets $8,000 of the gain — saving roughly $1,200 to $1,900 in federal tax depending on your bracket.