The basic mechanic
Selling an investment at a loss lets you offset capital gains elsewhere in your portfolio — and up to $3,000 of ordinary income per year if losses exceed gains, with the remainder carried forward indefinitely.
The wash sale trap
Buying back the same or a "substantially identical" security within 30 days before or after the sale disallows the loss entirely. Swapping into a similar-but-not-identical fund keeps you invested in the same asset class without triggering the rule.
When it's worth the effort
Harvesting makes the most sense in taxable brokerage accounts during down years, and matters far less inside tax-advantaged accounts where it isn't available at all.
