Person in a wetsuit on the beach, looking serene and happy while holding a paddleboard aloft.
Tax Strategies

Get automated tax-loss harvesting through Personal Advisor

Save on taxes and have more money to invest

Capital gains taxes can drain away about 15% to 20% of your realized gains each year. Compounded over time, that could be a huge missed opportunity. Our advisors consider taxes from the moment you enroll. As we optimize your portfolio, we'll focus on strategies that work to maximize your after-tax returns. Tax-loss harvesting (TLH) is one way we can do that.

Tax-loss harvesting at a glance

See how we use tax-loss harvesting to help keep your portfolio more tax efficient.

"It's a silver lining that can help you feel more in control."
You have certain cookies disabled on the Vanguard site.
In order to watch this video, you must agree to the use of cookies provided by YouTube.
Click to permit these cookies and watch the video.

How does tax-loss harvesting work to help you optimize your portfolio?

Monitors portfolio daily

Our proprietary technology periodically scans your portfolio looking for opportunities in harvestable Vanguard ETFs® that have gone down in value.* This occurs after other applicable portfolio activities—like rebalancing—are prioritized.

Harvests losses automatically

We sell shares of harvestable Vanguard ETFs that meet our research-based criteria and reinvest the money in a similar investment (or use it to rebalance, if needed), keeping you fully invested and your allocation on track.

Allows you to offset capital gains

You can use the losses to offset any realized capital gains you have for the year and up to $3,000 of regular taxable income. If you have leftover losses, you can carry them forward to use in future tax years.**

Allows you to reinvest tax savings

At tax time, you can reinvest your tax savings and let compounding go to work. (This step is optional, but it may give you the most long-term benefit.)

A bar graph showing the average potential gains of using automated TLH at daily, monthly, quarterly, and annual frequencies. The average potential gain is close to .40% when TLH is used at a daily frequency, and decreases the less frequently TLH is used.
  Woman with curly brown hair and black-rimmed glasses sitting at a desk and smiling.

See the power of automated TLH

Here's a breakdown of the average potential gains of using TLH at different frequencies.

A bar graph showing the average potential gains of using automated TLH at daily, monthly, quarterly, and annual frequencies. The average potential gain is close to .40% when TLH is used at a daily frequency, and decreases the less frequently TLH is used.
A bar graph showing the average potential gains of using automated TLH at daily, monthly, quarterly, and annual frequencies. The average potential gain is close to .40% when TLH is used at a daily frequency, and decreases the less frequently TLH is used.
A bar graph showing the average potential gains of using automated TLH at daily, monthly, quarterly, and annual frequencies. The average potential gain is close to .40% when TLH is used at a daily frequency, and decreases the less frequently TLH is used.

Notes: Depicts the average TLH benefit—the difference in internal rate of returns of the baseline portfolio with and without TLH—for 15-year rolling periods, from the period starting in 1982 to the period starting in 2005 and concluding in 2019. The hypothetical portfolio is based on 400 securities contained in a risk model to create a market-cap-weighted index portfolio, similar to an S&P 500 or Russell 3000 Index portfolio. The frequency indicates how often the portfolio was scanned for harvesting opportunities, which were identified as tax lots with at least a 10% loss relative to cost basis. This analysis assumed quarterly cash flows of 5%, capital gains availability of 3% of the portfolio value, an eventual liquidation of 50%, a harvest tax rate of 40%, a liquidation tax rate of 25%, fund-level harvesting, and a relative transaction cost of 10 basis points. The model does not consider commissions, underlying product costs, or advisory fees.
Source: Vanguard calculations using data from Axioma.

How does tax-loss harvesting benefit you?

A graphic that shows .3%, the cost of Personal Advisor Select, subtracted from .95%, the automated TLH benefit during periods of high volatility. The result is a .65% net after-tax excess benefit.

A way to keep—and save—more of your money

Tax-loss harvesting can reduce your capital gains taxes by using losses to offset gains, but it also allows you to stay fully invested and aligned with your strategy. The money you save can be reinvested, giving you the chance to greatly increase the value of the savings.

A strategic approach designed to reduce investment risk

We studied 80,000+ combinations of volatility environments and investor profiles to understand how TLH goes to work to help lower your tax bill for the year.*** Much of the benefit of tax-loss harvesting depends on when and how it's implemented. For example, using TLH on your own and across firms may increase your investment risk. We can help maximize your investment returns while working to minimize the risk of using TLH.

Part of a suite of tax strategies that can help maximize growth

By combining a smart tax-loss harvesting strategy with other tax strategies like smart asset allocation and strategic drawdown, a Vanguard advisor can help ensure you're keeping more of your money working toward your goals.

TLH benefits may fully offset the cost of Vanguard Personal Advisor SelectTM

A graphic that shows .3%, the cost of Personal Advisor Select, subtracted from .95%, the automated TLH benefit during periods of high volatility. The result is a .65% net after-tax excess benefit.
A graphic that shows .3%, the cost of Personal Advisor Select, subtracted from .95%, the automated TLH benefit during periods of high volatility. The result is a .65% net after-tax excess benefit.

Source: Vanguard's research-based model for estimating the benefit created by tax-loss harvesting. The tax-loss harvesting impact is calculated as the difference in internal rate of returns (IRR) of the baseline portfolio without tax-loss harvesting and the portfolio with tax-loss harvesting. The variables used to consider a large variety of investor profiles were levels of cash flows, realized capital gains, liquidation, and tax rates. The impact shown is the median benefit. In a high-volatility 15-year market environment the model's estimate ranged from 0.51% to 1.4% and during an average level of volatility, the estimate ranged from 0.08% to 0.83%.

0.30% is the fee for Personal Advisor Select and Personal Advisor Wealth Management.

Note: The figures above are hypothetical estimates and do not represent the TLH benefits actually received by any client of Personal Advisor Select. The actual TLH benefits that any client may receive are highly dependent upon their particular situation. This model provides a potentially strong case for tax-loss harvesting for investors with a net worth above the 90th percentile of $1.19 million.

How tax-loss harvesting can make a difference

Let's discuss two different scenarios for the same client, Kelly, and the resulting returns for one of her investments. In one, she agrees to use TLH, and in the other, she decides not to.

In 2021, Kelly and her husband were excited to enroll in Personal Advisor Select to help prepare for their upcoming retirement in 2025. As a longtime Vanguard investor, Kelly follows Vanguard's investment principles and is eager to find a way to protect her nest egg during periods of market volatility.

Woman with long white hair sitting by a window and smiling.

Kelly uses TLH

Her advisor discussed TLH as a particularly effective strategy, so she enrolled in the service despite being hesitant to sell any portion of her savings at a loss.

One of her investments decreased in value from $30,000 to $27,000. Selling the investment at a loss of $3,000 allowed her to save 30%—or $900—in ordinary income taxes. She reinvested the $27,000 proceeds and the additional $900 in tax savings for a total of $27,900. Over the years, the investment value doubled to $55,800. After she sold the investment and paid 15% in capital gains taxes—or $4,185—the net proceeds were $51,615.

Although she was initially hesitant, she now feels more assured after using TLH to take control back from volatile markets.

Woman with long white hair looking out of a window with a somber expression.

Kelly doesn't use TLH

Although she's a suitable candidate for TLH, Kelly wasn't convinced about selling any part of her savings at a loss. She didn't want to lose money after working so hard to build up her nest egg. The investment doubled from $27,000 to $54,000 over the years. After Kelly sold the investment and paid 15% in capital gains taxes—or $4,050—the net proceeds were $49,950. She could have saved $1,665 with TLH.

The chart below shows Kelly's investment returns with and without TLH for the investment in her portfolio that decreased in value.

Note: This example is for illustrative purposes only and does not consider any transaction costs, costs of the underlying investments, or the impact of advisory fees.

Woman with long white hair looking out of a window with a somber expression.

Kelly's investment returns with and without TLH

A graphic that shows an original investment of $30,000 that decreases in value to $27,000. It splits into two branches. The first branch shows net proceeds of $51,615 after Kelly uses TLH, and the second branch shows net proceeds of $49,950 after Kelly opts out of TLH. Kelly could have saved $1,665 with TLH.
A graphic that shows an original investment of $30,000 that decreases in value to $27,000. It splits into two branches. The first branch shows net proceeds of $51,615 after Kelly uses TLH, and the second branch shows net proceeds of $49,950 after Kelly opts out of TLH. Kelly could have saved $1,665 with TLH.
A graphic that shows an original investment of $30,000 that decreases in value to $27,000. It splits into two branches. The first branch shows net proceeds of $51,615 after Kelly uses TLH, and the second branch shows net proceeds of $49,950 after Kelly opts out of TLH. Kelly could have saved $1,665 with TLH.

This is just for one of Kelly's investments. Personal Advisor Select's automated TLH scans Kelly's entire portfolio periodically or in accordance with our methodology, making her potential after-tax returns much greater if losses are harvested during periods of market volatility.

Note: This case study is based on a real client scenario that has been simplified for illustrative purposes. It does not represent any actual client quotes, results, or experiences.

In addition to TLH, here are some additional tax strategies an advisor can use:

In-kind services

Moving your investments into the service "in kind" rather than selling them (which can trigger a large tax bill).

Tax efficiency of core holdings

Using tax-efficient investments for the core of your portfolio—including investments specifically designed to minimize taxes if you're in a high tax bracket.

Active funds

Placing any active funds and other higher-tax investments in tax-advantaged accounts to defer or eliminate those taxes.

Smart drawdowns

Drawing down your assets in tax-smart ways, including Roth conversions and charitable giving strategies.

Get the personalized service you deserve.
See how Vanguard advice can get you more for your money.

Get the personalized service you deserve.
See how Vanguard advice can get you more for your money.

Frequently asked questions about tax-loss harvesting

Who could benefit

How it works

Ready to get started?

See what Vanguard advice can do for you.

866-969-5384
Monday–Friday, 8 a.m.–8 p.m., Eastern time

*On days your portfolio has rebalancing or other trading activity scheduled or in progress, we'll pause checking for tax-loss harvesting opportunities. Details on which Vanguard ETFs can be harvested will be available in the Tax-Loss Harvesting Addendum to your Service Agreement that you'll discuss with your advisor.

**By nature, tax-loss harvesting results in a lower cost basis for the investments you purchase with the sales proceeds, meaning more of your investment could be subject to taxes when you sell it later. So, it's most beneficial and appropriate if you think your tax rate will be lower in the future. If it's not, you may end up deferring the taxes owed but not ultimately reducing them.

***Vanguard, Tax-Loss Harvesting: A Portfolio and Wealth Planning Perspective (PDF) (Kevin Khang, Ph.D., et al., 2020).

††Note that when making other non-tax-loss-harvesting trades in your portfolio in order to align with our investment methodology, we may choose to cause a wash sale in certain circumstances.

†††Details on which Vanguard ETFs can be harvested or used as Vanguard Replacement ETFs will be available in the Tax-Loss Harvesting Addendum to your Service Agreement that you'll discuss with your advisor. 

For more information about Vanguard mutual funds or ETFs, obtain a mutual fund or ETF prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.

You must buy and sell Vanguard ETF Shares through Vanguard Brokerage Services (we offer them commission-free online) or through another broker (who may charge commissions). See the Vanguard Brokerage Services Commission and Fee Schedules on Vanguard.com for limits. Vanguard ETF Shares are not redeemable directly with the issuing Fund other than in very large aggregations worth millions of dollars. ETFs are subject to market volatility. When buying or selling an ETF, you will pay or receive the current market price, which may be more or less than net asset value.

We recommend that you carefully review the terms of the Tax-Loss Harvesting Addendum to your Service Agreement and consult a tax advisor before enrolling in tax-loss harvesting in your advised accounts. We do not provide legal or tax advice, and none of the information provided on this webpage is intended as tax or legal advice.

All investing is subject to risk, including the possible loss of the money you invest.

Vanguard's advice services are provided by Vanguard Advisers, Inc. ("VAI"), a registered investment advisor, or by Vanguard National Trust Company ("VNTC"), a federally chartered, limited-purpose trust company.

The services provided to clients will vary based upon the service selected, including management, fees, eligibility, and access to an advisor. Find VAI's Form CRS and each program's advisory brochure here for an overview.

VAI and VNTC are subsidiaries of The Vanguard Group, Inc., and affiliates of Vanguard Marketing Corporation. Neither VAI, VNTC, nor its affiliates guarantee profits or protection from losses.