Once a year, investors get a chance to lower their tax bill on investments outside of tax-advantaged 401(k) and IRA accounts. It can save thousands annually and is not difficult to do, but it requires the discipline to take the time to gather your records and remember the rules. We're here to help with tax-sensitive investing, and what follows is a reminder about how tax-loss harvesting works.

This maneuver enables you to lower your taxes by realizing investment losses and applying against capital gains or ordinary income. Even though you might not have any gains right now, you can use loss-harvesting in the future for gains or income. Here's how it works: Sell an investment valued at less than you paid for it. Use that loss to lower capital gains on a profitable investment or deduct up to $3,000 of losses from your income. Reinvest in investments that fit into your portfolio and match your strategic goals.

The steps in tax-loss harvesting are: