When stocks or bonds decline in value, you may be able to harvest those losses to offset capital gains elsewhere.
Harvesting losses means selling investments in taxable accounts that have lost value to offset capital gains elsewhere and help reduce taxes owed.
What Happens When You Sell a Position That Has Lost Value?
What Is the Wash-Sale Rule?
Tax swaps enable you to invest proceeds from the sale of a losing position to lower costs or target new markets.
Replacing higher-fee mutual funds with low-cost core equity and bond ETFs may help you build more cost-efficient portfolios. Expense ratios for SPDR® Portfolio ETFs are 94% lower than the median US-listed mutual fund.1
Use our Morningstar Fund Comparison Tool to compare your selected mutual funds and ETFs.
The time to harvest losses is when losses occur. Investments that are down early in the year could bounce back into positive territory — resulting in missed opportunities to sell losers and book losses to offset gains.
To get maximum value from tax-loss harvesting, take a long-term view of the asset and your needs when making decisions and consider:
Loss Amount
If a loss is less than $2,000, transaction and tracking costs may erode tax savings.
Holding Period
The longer you plan to hold the asset, the greater the chance that the tax savings you’ve re-invested will grow.
Legacy Plans
If an asset will be left to heirs, there’s less need to measure the value of harvesting a current loss against future taxes due. Because heirs receive a step-up in basis, asset appreciation doesn’t turn into a future tax liability.
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