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Tax Optimization

The Benefits of Tax Loss Harvesting+

We’ve automated tax loss harvesting which can help you save on taxes over time.

Articles by Betterment Editors

By the Editorial Staff
Betterment Resource Center  |  Published: April 8, 2019

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 identically investments elsewhere.

Learn More

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