Tax Loss Harvesting: What You Need to Know

With the end of the tax year a few months away, it is never too early to plan ahead with exchange traded funds.

On the upcoming webcast, Tax Loss Harvesting: What You Need to Know, Matthew Bartolini, Vice President and Head of SPDR Americas Research at State Street Global Advisors, Joshua Jenkins, Portfolio Manager for CLS Investments, and Blaine Docker, Chief Operating Officer at Main Management, will discuss the current status of the fixed-income environment and consider ways to incorporate ETFs as a means to effectively harvest potential losses.

Fixed-income markets struggled as the Federal Reserve hiked interest rates. The declines, though, might have a silver lining as they present the opportunity for investors to exercise effective tax management and make prudent use of unrealized losses.

Specifically, bond investors may engage in tax-loss harvesting to efficiently manage their portfolios. Tax loss harvesting describes the strategy where investors sell stocks or an ETF at a loss to help offset any capital gains tax liability. Thus, recognition of short term capital gains, which are taxed at a higher rate, will be limited. This can help limit the amount an investor will owe and can preserve capital in the end.

Some capital gains that are offset by large losses can be carried forward and booked against total income. In order to do a carry-forward, the wash-sale rule must be adhered to – the investor can not try to buy the same investment 30 days before or after the sale is made.