I’m sure there’s something crucial I’m not understanding, but it seems like you’re just losing money? I’m trying to learn about investing and I’m so confused
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Tax-loss harvesting is a way to offload taxes from now to later. If you sell at a loss in this year, the government will take that out of any investment profits you made this year before taxing it, so you get a small break. This tax loss can be carried forward year over year, if it’s larger than your investment profits. At the same time, you can simply reinvest into the same fund later this year; your investment position hasn’t significantly changed, but you have an investment loss on the books. This is counterweighed by the fact that your new investment holdings have a lower purchase value, so will have greater “profit” when you end up selling them again.
The value in this is that a dollar saved today and invested today is worth a lot more than a dollar saved and invested X years later. So having “losses” now means less money paid out to taxes this year, which means more money put into investments earlier. Yes, you will pay more in taxes later, but the additional investments you’ve made in the mean time from the taxes you’ve saved should yield more money than the additional taxes you’re paying.
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