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.
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How Does Betterment Calculate Investment Returns?
Understanding and using time-weighted and money-weighted returns within your Betterment dashboard.
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