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An extra 1.8% on top of your returns?

Meet Tax-Loss Harvesting.

Tax-Loss Harvesting helps turn a dip in the market into a tax deduction. When you claim a loss on an investment, you can lower your tax bill at the end of the year, which means more money to reinvest. On average, we’ve added an extra 1.8% to our Automated Investing Account clients’ after-tax returns.

See assumptions

Our secret recipe? Homemade automation.

We’re constantly looking for those magic ingredients that can help lower your taxes. Here’s how it works.

Part 1:

We identify the loss

Pretend your investments are slices of pie. A slice of rhubarb pie goes for a premium — $10. But soon, the market is flooded with rhubarb and the price falls to $5.

Part 2:

We harvest the loss

Thanks to our super-smart software, we find some delicious gooseberry pie for just $5, so we sell your rhubarb and buy gooseberry instead. Pie is pie, so really, your risk appetite doesn’t change. Different, but still dessert.

We saved you $42.61 on your taxes with Tax-Loss Harvesting.
We saved you $9.53 on your taxes with Tax-Loss Harvesting.

Part 3:

We help lower your taxes

While we wait for the baked desserts sector to rebound (give it time), you can use the $5 loss as a deduction to help lower your taxes — money you now have to reinvest (i.e., buy more pie). And there it is — we’ll keep trading slices to keep lowering your taxes. At every chance we have.

Still hungry? See our process.

Tax-Loss Harvesting benefits will vary. Wealthfront doesn’t provide tax advice.

Wealthfront does wonders for your taxes.
It also does a whole lot more.
Automatic trades
Our software does all the trading for you to help you maximize returns.
Expert-built portfolios
Our recommended portfolios are built by financial experts and personalized to your risk profile.
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Fully customizable
Adjust your allocations and edit your portfolio with hundreds of funds to choose from.
Tax-Loss Harvesting
We find opportunities to turn market dips into tax savings, to help boost your after-tax returns.
Automatic rebalancing
We’ll balance your funds as the market moves to keep you in line with your investment targets.
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Delightfully easy
Track your progress, see your net worth and link all your accounts in our easy-to-use app.

Taxes are annoying. Let’s break it down.

Some helpful FAQs.
Learn more at our help center.

You had me at 1.8%. When do I get the money?

Patience is a virtue, especially now. The longer you wait to cash in, the more valuable TLH becomes. That’s because, for Automated Investing Account clients, your tax savings from TLH can be reinvested and compounded over time.

Tell me more about the tax deferrals thing.

Glad you asked. The good thing about Tax-Loss Harvesting is that it can help lower your taxes when you sell investments, or it can help lower the taxes on your ordinary income, up to $3,000. If you don’t use these losses you’ve harvested in any given year, you can defer that to the next year. Or the next.

Do I need to worry about capital gains tax?

Actually, Tax-Loss Harvesting is especially valuable for investors who regularly recognize short-term capital gains. Harvested losses can be applied to offset both capital gains and up to $3,000 in ordinary income annually. And any losses that can’t be applied in a given tax year can be carried over to offset future income and capital gains.

Is there a limit to how much loss I can harvest?

Great question. You can apply your harvested short-term losses to offset short-term gains or reduce your taxable ordinary income by up to $3,000 per year. And you can even carry forward your tax loss to future tax years, or offset your long-term gains. And you can keep using or deferring your harvested losses for tax breaks for future years.

Do you guys offer direct indexing?

Yes! And not to brag, but we’re the only automated investing service that does. When your account reaches at least $100,000, we can automatically look for opportunities on the individual stock level — not just on the ETF level. When your balance hits $500,000 we offer Tax-Loss Harvesting for Smart Beta, at no additional cost.

Wait, what kind of accounts does this work on?

Good question. Tax-Loss Harvesting is only relevant to taxable accounts. It doesn’t apply to tax-advantaged accounts like a 529, IRAs or 401(k)s, since gains and losses in those types of accounts are not taxable events.

What about wash sales? And what’s a wash sale?

Sounds more fun than it is, honestly. The IRS defines a wash sale as buying back a stock you've sold (or one that is "substantially identical") within 30 days. When we harvest a loss, we purchase an ETF that tracks a different index, but is highly correlated with the ETF we sold, to keep your portfolio more or less the same. We can buy the original ETF back after 31 days, if it shows renewed potential.

I’m sold. How soon can this start happening?

We’re ready when you are. And our robots are too. When you open and fund your account, our software immediately starts looking for TLH opportunities daily. At the end of the year, we’ll send you a Form 1099 to be filed with your tax return that includes the relevant investment transactions in your Wealthfront accounts, including those from Tax-Loss Harvesting.

By using this website, you understand the information being presented is provided for informational purposes only and agree to our Terms of Use and Privacy Policy. Wealthfront Advisers relies on information from various sources believed to be reliable, including clients and third parties, but cannot guarantee the accuracy and completeness of that information. Nothing in this communication should be construed as an offer, recommendation, or solicitation to buy or sell any security. Additionally, Wealthfront Advisers or its affiliates do not provide tax advice and investors are encouraged to consult with their personal tax advisors.

The effectiveness of the Tax-Loss Harvesting strategy to reduce the tax liability of the client will depend on the client’s entire tax and investment profile, including purchases and dispositions in a client’s (or client’s spouse’s) accounts outside of Wealthfront Advisers and type of investments (e.g., taxable or nontaxable) or holding period (e.g., short- term or long-term).Tax loss harvesting may generate a higher number of trades due to attempts to capture losses. There is a chance that trading attributed to tax loss harvesting may create capital gains and wash sales and could be subject to higher transaction costs and market impacts. In addition, tax loss harvesting strategies may produce losses, which may not be offset by sufficient gains in the account and may be limited to a $3,000 deduction against income. The utilization of losses harvested through the strategy will depend upon the recognition of capital gains in the same or a future tax period, and in addition may be subject to limitations under applicable tax laws, e.g., if there are insufficient realized gains in the tax period, the use of harvested losses may be limited to a $3,000 deduction against income and distributions. Losses harvested through the strategy that are not utilized in the tax period when recognized (e.g., because of insufficient capital gains and/or significant capital loss carryforwards), generally may be carried forward to offset future capital gains, if any.

All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. Historical returns, expected returns, and probability projections are provided for informational and illustrative purposes, and may not reflect actual future performance. Please see our Full Disclosure for important details.

Investment management and advisory services--which are not FDIC insured--are provided by Wealthfront Advisers LLC (“Wealthfront Advisers”), an SEC-registered investment adviser, and financial planning tools are provided by Wealthfront Software LLC (“Wealthfront”). Brokerage products and services are offered by Wealthfront Brokerage LLC, member FINRA / SIPC.

Wealthfront, Wealthfront Advisers and Wealthfront Brokerage are wholly owned subsidiaries of Wealthfront Corporation.

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