Tax-loss harvesting basics — the strategy that quietly saved me $3,000
I missed tax-loss harvesting for 5 years before I figured out it applied to me. Cost me real money. Here's the basics.
What it is
If you have an investment that's down (a stock, ETF, or mutual fund worth less than you paid), you can sell it to "realize" the loss. That loss reduces your taxable income — up to $3,000/year of ordinary income, with the rest carried forward.
The wash-sale rule
You can't sell a losing investment and buy back the SAME thing within 30 days — IRS calls this a wash sale and disallows the loss. The workaround: sell VTI (US total market) and buy VOO (S&P 500). Similar exposure, not "substantially identical" per the rules.
How much it actually saves
If you're in the 22% federal bracket and you harvest $3,000 in losses, you save $660 on taxes. Plus state. Worth doing.
The tools
If you use Wealthsimple or Vanguard, they have automatic harvesting features. Or do it manually once a year in December.
For tracking, Koinly (crypto) or Sharesight (stocks) helps.
Books worth reading
The Little Book of Common Sense Investing by John Bogle — basics. Tax-Free Wealth by Tom Wheelwright — broader tax strategy.
What to skip
Anything calling itself a "tax shelter." Tax-advantaged accounts (Roth IRA, 401k, RRSP, TFSA) yes. Schemes from podcast ads no.
Honest take
If you have a brokerage account and any positions down, sell those positions in December, buy something similar, and claim the loss. Worth $500-2,000/year for most people. Easy money you're leaving on the table.