What is tax loss harvesting?
Last updated: 12 August 2026
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When an investor sells a position at a loss, it can reduce the amount of taxes they may need to pay. This is because capital gains are measured by the net total profits/loss of all their investing activities. In other words, trading losses can be deducted from an investor’s net capital gains tax liability.
Sometimes investors will review their portfolio specifically for open loss making positions and sell them to book the loss. Or they may sell a particular position that has lower gains than others for that asset. This often happens at the end of the year as investors may be tax planning.
When tax loss harvesting investors should be aware of Wash Sale Rules for stocks/ETF/options trading and other IRS regulations.
*Note: This is provided for informational purposes only. etoro does not provide tax or legal advice. You should consult with a tax or legal professional to address your particular situation.*
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