Example
Say you sell an investment you purchased for $1,000 for $3,000, giving you a realized capital gain of $2,000. This $2,000 gain is taxable in the year you sold the stock and took the profit. Now say you have another stock you bought for $5,000 that is now worth $2,000.
You can deliberately sell that losing investment, harvest the loss to offset that $2,000 gain and apply the excess $1,000 to reduce your taxable income when taxes are due.