Tax-loss harvesting can help offset gains and generate higher after-tax returns.
Vanguard's estimate of what tax-loss harvesting can add for higher-net-worth investors.1
Even in a rising market, some investments in your portfolio may fall below what you paid. Tax-loss harvesting turns those dips into tax savings, without taking your money out of the market.
When an investment falls below what you paid, sell it to lock in a capital loss.
Buy a similar investment right away, so your portfolio keeps tracking the market.
The loss offsets capital gains, plus up to $3,000 of ordinary income a year. Unused losses carry forward indefinitely.
Every dollar of tax you don't pay this year stays invested and keeps compounding. Over time, that extra growth is the additional after-tax return.
Higher after-tax returns compared to investing in an ETF or mutual fund.
Your investment tracks the performance of the S&P 500 (or chosen index) while losses are being harvested.
Harvested losses reduce capital gains taxes. Average tax-loss harvesting potential is about 28% of your portfolio over 10 years.2
High-income investors. Investors in high-tax states with capital gains to offset.
Ultra-aggressive tax-loss harvesting for maximum tax efficiency.
Extra long and short positions are added to your portfolio using margin (borrowing). The extra positions allow more aggressive tax-loss harvesting compared to direct indexing alone.
Aggressive tax-loss harvesting can reduce capital gains taxes significantly. Loss harvesting potential is up to 100% of your portfolio in 2 years (at highest leverage).2
Offsetting large capital gains through stock or RSU sales or home sales.
Expert guidance from a dedicated, licensed investment adviser.
Your adviser builds a plan around your existing stocks/RSUs and tax situation.
Choose from a wide range of indexes such as the S&P 500, Nasdaq-100 and dozens more. Go beyond equities and include other assets such as bonds, commodities and alternative investments.
Exclude any stock that you already own. Add advanced strategies such as factor tilts for performance.
Your adviser coordinates with you on wash sales across your entire household (IRAs, 401(k)s, spouse's accounts, etc.).
A $500,000 position sold gradually over ten years, with new money going into a direct indexing account along the way.
Hypothetical illustration; Sarah is fictional. Assumes a $500,000 position with a $250,000 basis sold gradually over 10 years, $25,000 contributed quarterly, gains taxed at a combined 37.1% (top federal and California rates), harvested losses of 7.5% of new money in its first year, 4% in the second and 2.5% after, and no fees or transaction costs. Loss harvesting depends on market conditions and is not guaranteed.
Millions in one stock with almost no cost basis. She used it as collateral for a 130/30 portfolio and sold the stock gradually as losses built up.
Hypothetical illustration adapted from Nuveen's client material, “Managing wealth with tax-advantaged long/short.” Not an actual client. Taxes are deferred, not eliminated; results vary and are not guaranteed.
A complimentary 30-minute call. We'll look at your gains, tax rate and goals, and tell you plainly whether either strategy is worth it for you.
Tax-loss harvesting defers taxes; it does not eliminate them, and its value depends on your gains, tax rate and market conditions. Long-short strategies use leverage and short selling, which increase the risk of loss, and carry higher fees and financing costs. Past performance is not an indication of future results. Consult a tax professional about your situation.
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