Tax Selling

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Definition of 'Tax Selling'

Tax selling is the practice of selling an investment in order to realize a capital loss, which can then be used to offset capital gains or reduce taxable income. This can be a useful strategy for investors who are looking to reduce their tax bill, but it's important to understand the potential risks involved before taking action.

There are a few things to keep in mind when considering tax selling. First, you need to make sure that you have held the investment for at least one year in order to qualify for long-term capital gains treatment. Second, you need to be aware of the wash sale rule, which prevents you from claiming a loss on an investment that you've recently repurchased.

If you're considering tax selling, it's a good idea to consult with a financial advisor to make sure that you're doing it in the most tax-efficient way possible.

Here are some additional details about tax selling:

* The capital loss that you realize from tax selling can be used to offset capital gains that you've realized during the same year. If you don't have any capital gains to offset, you can carry the loss forward to future years.
* The amount of capital loss that you can claim each year is limited to $3,000. Any losses that you can't claim in one year can be carried forward to future years.
* Tax selling can be a good way to reduce your tax bill, but it's important to weigh the potential benefits against the risks before taking action.

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