How to automate tax loss harvesting

E*TRADE from Morgan Stanley


Summary: Tax loss harvesting can help you turn investment losses into tax benefits. Here’s how to start using tax loss harvesting with Core Portfolios.

Tax-loss harvesting with Core Portfolios robo.

While no one likes to sell an investment at a loss, there is a silver lining: you can often strategically sell those investments to offset the taxes you owe from profitable sales to help lower your current US federal income tax bill.  Core Portfolios now makes tax loss harvesting simpler.

What is tax loss harvesting?

Tax loss harvesting is a well-known tax planning strategy that investors use to reduce their current US federal taxable income. By selling an investment at a loss, it can help you counterbalance the tax hit of any capital gains you’ve earned. Any investment in a taxable account is eligible for tax loss harvesting, including stocks, bonds, mutual funds, and ETFs.

This offsetting isn’t restricted to gains and losses from the same year. If you don’t have any current gains to offset, you can carry over capital losses across multiple years to offset future gains. You can also use tax losses to potentially offset both short-term and long-term gains

How tax loss harvesting with Core Portfolio works

Core Portfolios is a robo-advisor that combines Morgan Stanley’s team of professionals with automated technology to manage your day-to-day investing. Investors who use Core Portfolios can now take advantage of tax loss harvesting with no additional effort on their part.

Turning on tax loss harvesting with Core Portfolios allows you to automatically harvest tax losses as the robo-advisor rebalances your portfolio. By strategically selling securities at a loss, Core Portfolios can help you reduce the taxable income that gets created by any gains the robo-advisor generates through its trading actions. When making a sale to generate a tax loss, Core Portfolios will look to purchase a replacement security in the same investment asset class to ensure you keep your target exposure.1

Unlike many other investment firms that use a robo-advisor, Core Portfolios allows investors to take advantage of tax loss harvesting starting with a minimum investment of $500 at no additional cost. It will also harvest tax losses even when it sells a fraction of a share.

Keep in mind that tax loss harvesting is only available for taxable Core Portfolio accounts, such as a brokerage account, and cannot be used for retirement accounts such as an IRA.

Investment comparison

How to get started with tax loss harvesting

Tax loss harvesting for Core Portfolios is a new feature that you’ll need to activate to start using.

Tax loss harvesting for Core Portfolios is a new feature that you’ll need to activate to start using.

Here’s how to turn it on for your account:

  1. To get started, you must have a taxable Core Portfolios account. Not yet a Core Portfolios customer? Sign up for a Core Portfolios account now.
  2. Once you log in, find the Tax Loss Harvesting section of the header and click ‘Enroll.’
  3. A popup will then confirm that you wish to activate the feature; click ‘Yes, Enroll’ to continue.
  4. Once you click ‘Yes,' Enroll,’ the popup will close. Your status in the Tax Loss Harvesting section of the header will now say ‘’Enrolled.’ If you wish to turn the feature off at any time, simply click the ‘Unenroll’ link in the header

With Core Portfolios, tax loss harvesting has never been easier. To learn more about this tax planning strategy, read What is tax loss harvesting?

You should be aware of the so-called “wash sale” rule, which occurs when you sell a security at a loss and purchase the same or substantially identical security within 30 days before or after the sale date. Any loss realized from the sale may not be currently usable. Any transaction that violates the wash sale rule may negate the benefit of the tax loss harvested. While Core Portfolios has certain precautions to avoid triggering wash sales, there is no guarantee that wash sales will not be generated by Core Portfolios tax loss harvesting.

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