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What is Tax-Loss Harvesting?

Tax-Loss Harvesting is part of PassivePlus®, our signature suite of investment features.  It takes advantage of movements in the markets to capture investment losses, which can reduce your tax bill, leaving more money to invest. It is available for all taxable investment accounts.

When an ETF in your Wealthfront portfolio declines in value, a common occurrence in broadly diversified investment portfolios, we sell that ETF at a loss if the loss meets certain thresholds established by our model. You can use the losses to offset ordinary income or investment gains, which can lower your overall tax bill.

What’s more, when we sell an ETF at a loss, we replace it with another highly correlated ETF. The result is that the risk and return profile of your portfolio is unchanged, even as Tax-Loss Harvesting can generate tax savings. These tax savings can then be reinvested to further grow the value of your portfolio. 

Read our Tax-Loss Harvesting White Paper for more details.

 

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PassivePlus® is Wealthfront’s signature suite of investment features. Designed by Wealthfront’s Research Team to optimize for efficiency and deliver additional risk-adjusted returns, each strategy is based on rigorous, time-tested academic research.