Tax-loss harvesting

Selling holdings at a loss to realise losses that offset taxable gains. It saves tax now, but lowers the cost basis of whatever replaces them, so much of the benefit is deferral.

Where you will meet it

Tax-loss harvesting appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Contrast the vehicles through which an investor can gain index-based equity exposure
  CFA Level III · Portfolio Management Pathway

  “Separately managed accounts hold the shares directly, allowing customisation such as tax-loss harvesting or ESG exclusions, but they need scale and add custody and administration cost.”

• Explain how taxes shape both the choice of asset allocation and the approach to rebalancing
  CFA Level III · Asset Allocation

  “Tax-loss harvesting can offset gains.”

See also

Cost basis

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with T · Glossary