The Advised Advantage: Explore tax-loss harvesting

Our latest tax-efficiency feature

Tax-loss harvesting, the latest addition to our suite of tax strategies, is coming soon at no additional cost to you. This exclusive service for advised clients helps to ensure you’re ready for bull and bear markets and everything in between. 

 

How it works

As an investor, you’re only taxed on net capital gains—the amount you earn minus any investment losses.

Tax-loss harvesting helps to lower your tax bill for the year by looking for opportunities to offset realized gains with realized losses. It's especially useful when markets are volatile. Certain Vanguard funds are strategically sold at a loss and replaced with a surrogate fund* that maintains your target asset allocation.

And, if you have a year where your capital losses are greater than your capital gains, you can also offset up to $3,000 of ordinary income on your federal income taxes and indefinitely carry over any remaining loss to future years.

 

A look at the benefits

Tax-loss harvesting, combined with other tax strategies, helps to ensure you’re maximizing your after-tax returns. It works to:

  • Bring you more value at a time you least expect—when markets are volatile.
  • Help reduce your taxes, so you can enjoy better investment outcomes.
  • Help you proactively react to market volatility with a strategic approach that’s been backed by extensive research.**

 

Is it right for you?

You’ll generally see the most positive impact from tax-loss harvesting if you:

  • Have a substantial portion of your money invested in taxable accounts. 
  • Are in a higher tax bracket now than you’ll likely be in the future. 
  • Have purchased your investments at a variety of prices over time and have realized capital gains to offset using losses harvested by the service. 
  • Have a substantial portion of your investments advised by Vanguard Personal Advisor Services®.

At an upcoming appointment, your advisor will discuss the tax-loss harvesting service in further detail. They’ll review the benefits as well as any associated risks and help you enroll if it's right for you.


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*Surrogate funds are Vanguard ETFs® with similar asset and sub-asset allocations to the funds we're replacing. Details on which Vanguard funds can be used as surrogates will be available in the Tax-Loss Harvesting Addendum to Your Service Agreement for Vanguard Personal Advisor Services that you'll discuss with your advisor.

**Vanguard, Tax-Loss Harvesting: A portfolio and wealth planning perspective (Kevin Khang, Ph.D., et al., 2020).

Tax-loss harvesting involves certain risks, including, among others, the risk that the new investment could have higher costs than the original investment and could introduce portfolio tracking error into your accounts. There may also be unintended tax implications. We recommend that you consult a tax advisor before taking action. Vanguard does not provide legal or tax advice.

Before enrolling in tax-loss harvesting in your advised accounts, we recommend that you carefully review the terms of the Tax-Loss Harvesting Addendum to Your Service Agreement for Vanguard Personal Advisor Services and consult a tax advisor. 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.

Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.