GlossaryIntermediate
Tax-Loss Harvesting
Deliberately selling an asset at a loss to realize a capital loss that can offset taxable gains elsewhere.
Tax-loss harvesting means deliberately selling an asset while it's trading below its cost basis, realizing a capital loss that can generally be used to offset capital gains realized elsewhere, potentially reducing an overall tax bill.
Specific rules around this — including whether and how quickly a sold asset can be repurchased — vary by jurisdiction; see Kaavon's "Understanding Crypto Tax Loss Harvesting" guide and the relevant country-specific tax guide for the details that actually apply.
Examples
- An investor holding a position at an unrealized loss might sell it specifically to realize that loss for tax purposes, before deciding whether to re-establish the position.
- Tax-loss harvesting only changes when a loss is realized for tax purposes — it doesn't change the underlying asset's actual performance.