The Benefits of Tax Loss Harvesting+
We’ve automated tax loss harvesting which can help you save on taxes over time. Learn about the benefits of TLH+.
Tax loss harvesting is the practice of selling an asset that has experienced a loss. The sold asset is replaced by a similar one, helping to maintain your risk level and your expected returns. By realizing, or “harvesting” a loss, you can:
- Offset taxes on realized capital gains.
- Reduce tax liability by reducing your income.
Realized losses on investments can offset gains and reduce ordinary taxable income by as much as $3,000 per year.
We do this all for you—at no additional cost—with our automated Tax Loss Harvesting+ feature.
You could benefit from Tax Loss Harvesting+ if…
- You are investing in a taxable investment account.
- You plan to donate to charity or leave your assets to your heirs.
- The IRS allows you to offset your realized capital gains with realized capital losses.
- The IRS allows you to reduce up to $3,000 from your ordinary income.
We don’t recommend Tax Loss Harvesting+ if…
- Your future tax bracket will be higher than your current tax bracket.
- You can currently realize capital gains at a 0% tax rate.
- Under current law, this may be the case if your taxable income is below $39,375 as a single filer or $78,750 if you are married filing jointly.
- You are planning to withdraw a large portion of your taxable assets in the next 12 months.
- You risk causing wash sales due to having substantially identical investments elsewhere.
Video: How Can Tax Loss Harvesting Help?
We explain exactly how tax loss harvesting works, and why it can be a powerful tool during times of market volatility.
3 Simple Ways You Could Pay Fewer Taxes If You Have An Investment Account
Tax loss harvesting, asset location, and utilizing ETFs instead of mutual funds can eliminate or reduce your tax bill, depending on your situation. Here’s why.
What’s Inside the Betterment Portfolio Strategy?
Explore the asset classes in Betterment's recommended set of portfolios. Then, take a look at the exchange-traded funds (ETFs) underlying each part of the portfolio strategy.
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