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Investment Strategy

Tax-Loss Harvesting Strategy

Realize losses in down markets to help offset gains.

Overview

Tax-loss harvesting realizes investment losses to offset current or future capital gains, which can help reduce your tax bill, coordinated with your CPA. The benefit is typically modest and varies with market conditions, but it can add incremental after-tax value over time, see how compounding works with our free Compound Growth Visualizer.

Harvested losses can also offset gains realized when rebalancing, or when diversifying a concentrated position as part of The Rubric Unwind. We manage harvesting within IRS wash-sale rules for the accounts we manage, and effectiveness varies with market conditions and individual circumstances.

How it works

A systematic process for realizing losses when they're available.

Offset Capital Gains

Realized losses can offset capital gains now or be carried forward.

Potentially Higher After-Tax Returns

Reducing tax drag may improve after-tax results over time, when losses are available. Benefits vary and are not guaranteed.

Rebalancing and Diversifying

Harvested losses can offset gains from rebalancing or from diversifying a concentrated position.

Wash-Sale Aware

Harvests in accounts we manage follow wash-sale rules; purchases in accounts we don't manage, such as a spouse's 401(k), can still trigger one.

Common questions

What is tax-loss harvesting?

Selling an investment that is below its cost to realize a loss that can offset capital gains, and for most filers up to $3,000 of ordinary income a year, with unused losses carried forward. The proceeds stay invested in a similar, but not substantially identical, holding.

What is the wash-sale rule?

If you buy a substantially identical security within 30 days before or after selling it at a loss, the loss is disallowed. In a taxable account it is generally added to the cost basis of the new shares, but if the repurchase happens in an IRA or 401(k), the loss can be lost permanently. Purchases in accounts we don't manage, including a spouse's account or a retirement account, can trigger the rule, so we coordinate with you and your CPA.

Does tax-loss harvesting always reduce taxes?

No. Benefits depend on market conditions and your tax situation, and harvesting lowers your cost basis, which can increase taxes later. We coordinate harvesting with your CPA.

Next step

Plan harvesting with your CPA

Let’s talk about how harvesting fits this year’s gains, including a concentrated position.

Talk to an Advisor Not sure where to start?

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