What is Tax Loss Harvesting?

Tax loss harvesting is the process of selling an investment that is losing money to generate capital losses you can write off on your tax return. Current tax rules allow you to use capital losses to offset capital gains. Although many investors use tax loss harvesting at the end of the year, you can harvest tax losses at any time.


How Much Tax Loss Harvesting Can Save

The amount of money you can save in taxes through tax loss harvesting depends on your tax bracket and the type income you’re trying to offset. The  IRS taxes the profits you earn when you sell a stock or other investment, but different tax rates apply depending on how long you’ve owned the investment. The IRS allows you to offset short-term gains with short-term losses and long-term gains with long-term losses. If you have a loss in one but a gain in the other, the loss can be used to offset the gain.

Long-term capital gains tax rates run from 0% to 20%. Short-term capital gains rates range from 10% to 39.6% and are the same as income tax brackets.


Tax Loss Harvesting in Income Strategy™

Income Strategy™ allows you to take advantage of tax loss harvesting; however, you must indicate its use for each withdrawal strategy. To use tax loss harvesting, open a withdrawal strategy in the “Strategies” screen. Use the selection indicator to turn on tax loss harvesting for that strategy. Repeat for each strategy you want to analyze the benefits of tax loss harvesting.


Let Us Help

Our full service registered investment advisory firm is available to help with tax loss harvesting. For a nominal fee, we can set up a consultation and analysis of your strategies and examine the benefits of tax loss harvesting.