To satisfy your withdrawal request we will typically have to sell some of your Wealthfront investments. If those investments are sold at a gain then they will typically generate a tax liability.
However, when you withdraw money from an account at Wealthfront we work very hard to minimize the current tax liability on your gains. We do this by carefully choosing which lots among your Wealthfront investments we sell to satisfy your withdrawal. In particular, we’ll try to sell lots with losses first (since they generate no tax liability) followed by lots with only a small tax liability (typically those taxed at the lower long-term capital gains rate) and only then followed by lots with significant tax liability.
As a result, you’ll likely only generate an insignificant tax liability when withdrawing a small amount of money.
For more information, please review this link: How does Wealthfront choose which investments to sell when I withdraw?
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