tax loss harvesting

Definition

The practice of selling investments at a loss to offset capital gains and reduce tax liability, then often buying similar assets to maintain market exposure. It's using the tax code's lemons to make lemonade.

Example Usage

Her financial advisor recommended tax loss harvesting to offset the gains from selling her company stock.

Origin

Practice became popular in the 1970s as capital gains taxation and retail investing expanded

Fun Fact

The wash sale rule prevents you from buying the identical security within 30 days, so investors buy similar-but-not-identical assets to maintain their strategy.

Source: Personal tax planning and investment advisory terminology

Related Terms

Intermediate

expenditure

The formal way of saying 'money spent,' used by accountants and government agencies to make spending sound more official and less like shopping. It's the act of paying out funds or the amount actually disbursed, tracked obsessively in budgets everywhere. The difference between expenditure and expense is subtle enough that even accountants argue about it at parties—yes, those parties are exactly as fun as they sound.

💰 Finance / Accounting

Intermediate

Contingent Liability

A potential obligation that may or may not materialize depending on future events, like pending lawsuits or product warranty claims. It's Schrödinger's debt—simultaneously owing money and not owing money.

💰 Finance / Accounting

Intermediate

quick ratio

Current assets minus inventory divided by current liabilities—also called the 'acid test' because it measures whether you can pay bills without selling inventory. It's liquidity measurement for pessimists who assume everything in the warehouse is unsellable.

💰 Finance / Accounting

Beginner

Unearned Revenue

Another term for deferred revenue—cash received for work not yet performed, sitting on the balance sheet as a liability. It's having money in hand while owing labor, the service industry's constant state.

💰 Finance / Accounting

Intermediate

taxation

The art of transferring wealth from citizens to government coffers through a bewildering array of forms, deductions, and loopholes that require advanced degrees to navigate. It's the reason April 15th is the most dreaded day on the calendar and accountants drive nice cars. Somehow, despite everyone paying, roads still have potholes.

💰 Finance / Accounting

Intermediate

soft close

A preliminary month-end financial closing process that produces rough numbers quickly, allowing management to see how the month went before accountants spend weeks perfecting every accrual. It's the financial equivalent of a rough draft.

💰 Finance / Accounting

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