When you rebalance your portfolio, pay attention to the cost basis of the assets you plan to sell. The cost basis is the amount you paid for the assets. If you sell assets at a loss—in other words, sell the assets for less than the amount you paid for them—you will not incur taxes by selling. Keep good records of the assets you sell at a loss because you can deduct up to $3,000 in income taxes for capital losses each year. Additionally, if your capital gains do not exceed your capital losses, you will not pay an increased amount of taxes. By rebalancing your portfolio through selling assets at a loss, you can avoid paying taxes on capital gains, and you can buy the assets you need to rebalance your portfolio while minimizing market impact, taxes, and transaction costs.