Tax Loss harvesting+ is the practice of selling a security that has experienced a loss. By realizing, or "harvesting" a loss, investors are able to offset taxes on both gains and income. The sold security is replaced by a similar one, which helps maintain an optimal asset allocation and expected returns. While Betterment tracks your TLH+ losses within your account and displays them to those who have enabled the feature, the IRS requires Betterment to report total gain and loss figures from all sales during the tax year on Form 1099-B.
Your TLH+ harvests are simply recorded losses that are netted against any other gains and losses that were realized from the sale of shares.
Your 1099-B reflects your total net gain or loss on Page 4, between Box 1e and Box 1g, in the Short-Term Summary, as well as the Long-Term Summary.
Here are a few common reasons why the net gain/loss figure on your 1099-B may not match the amount of your TLH+ harvests.
- You requested an allocation change, which realized gains or losses.
- You requested a withdrawal, which realized gains or losses.
- You requested a goal to goal transfer, which realized gains or losses.
Example 1: TLH+ captures a $10,000 long-term loss on a 5/28/2022. You choose to do a withdrawal on 10/15/2022 which generates a $11,000 long-term gain. The Form 1099-B will reflect a net long-term gain of $1,000.
Example 2: TLH+ captures a $10,000 long-term loss on 5/28/2022. You choose to do a withdrawal on 10/15/2022 which generates a $3,000 long-term loss. The Form 1099-B will reflect a net long-term loss of $13,000.
Betterment is not a tax advisor, nor should any information herein be considered tax advice. Please consult a qualified tax professional.