Tax-Loss Harvesting Guide — Offset Capital Gains and Cut Your Tax Bill
Tax-loss harvesting is one of the most effective legal strategies available to investors for reducing their tax liability. The concept is simple: sell investments that have declined in value to realize losses, then use those losses to offset capital gains and up to $3,000 of ordinary income per year. Any unused losses carry forward indefinitely until fully utilized. The strategy has become increasingly accessible as major brokerages — including Schwab, Fidelity, and Vanguard — have automated harvesting features in their platforms, and commission-free trading has eliminated the transaction cost barrier. With the 10-year Treasury yield hovering around 4.02% and the Federal Reserve's rate cuts reshaping fixed-income returns, many investors are sitting on a mix of gains and losses across their portfolios that creates prime harvesting opportunities. But tax-loss harvesting is not as simple as selling losers and calling it a day. The IRS wash-sale rule, the distinction between short-term and long-term losses, and the interaction with your overall [capital gains tax](/article/capital-gains-tax-explained-short-term-vs-long-term-rates-and-how-to-minimize-your-tax-bill) bracket all determine whether harvesting actually saves you money. This guide covers the mechanics, the rules, and the practical strategies that make harvesting worthwhile.