By: Neerja Caprihan
Harvesting always brings with it a suggestion of abundance and happiness. It is emblematic of that time of the year when Mother Nature has generously enabled its bounties to proliferate and mature to the point where they are ready for humans to reap and use. The subsequent enrichment is not just significant for its monetary benefits, but physical, emotional and psychological ones too.
There are a number of festivals1 that celebrate this blissful time of the year, experienced at different times of the years by regions across the world. People get together to revel in heart-warming ways as the air fills with the uplifting beats of music, thrilling sounds of dance and comforting aroma of food. There is unmitigated joy, gratitude and gaiety as the changing seasons herald the processes of renewal and rejuvenation in all creation.
Closer home, the practice of tax-loss harvesting can be put to use to have a similar effect. What exactly does it entail? According to Investopedia, tax-loss harvesting is the timely selling of securities at a loss to offset the amount of capital gains tax owed from selling profitable assets. This strategy is commonly used to limit short-term capital gains, commonly taxed at a higher rate than long-term capital gains, to preserve the value of the investor’s portfolio while reducing taxes.2 The realized tax losses can potentially lower your end tax bill, and be reinvested in your investment portfolio.
Interactive Advisors has developed a Tax-Loss Harvesting (TLH) algorithm that is available to all clients who are invested in our taxable custom Asset Allocation portfolio. Clients who wish to take advantage of tax-loss harvesting in their taxable accounts may choose to opt in to the TLH program. This value-add strategy of selling assets at a loss to harvest tax losses will be implemented algorithmically in your Asset Allocation portfolio if you choose to activate this algorithm for your account. The benefits of TLH will vary depending on the unique tax situation of each client.
While we expect that the TLH algorithm will add value in general, the value added from TLH will depend on a variety of factors. We have put together all the basic TLH information in an easy-to-understand way for you in the white paper here. If you have further questions, check out the related FAQs. TLH may also not be suitable for your portfolio. Please read through the specific disclosures on Tax-Loss Harvesting available on our Forms and Agreements page.
The joys of harvesting are not just in the fields of food and agriculture after all! Plan and then reap your financial gains wisely, so that you can join the seasonal harvest celebrations with joyful abandon.
PHOTO CREDIT: https://www.shutterstock.com/ai-image-generator
VIA SHUTTERSTOCK
Footnotes and Sources
1 https://en.wikipedia.org/wiki/List_of_harvest_festivals
2 https://www.investopedia.com/terms/t/taxgainlossharvesting.asp
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