Tax-Loss Harvesting

with PNC Investments

How It Works

Tax-loss harvesting – offsetting capital gains with capital losses – can lower your tax bill and better position your portfolio going forward.

Tax-loss harvesting can be helpful in reducing or even eliminating your tax bill in a taxable brokerage account. Tax-loss harvesting lets you manage your tax burden by selling securities like stocks, bonds, mutual funds, and ETFs at a loss to offset the taxes owed on capital gains elsewhere in your portfolio (or even your income).  Doing this creates more tax-efficient investing and can even be used to offset taxes owed on regular income.

When considering tax-loss harvesting you should understand the differences between short- and long-term losses and how they are taxed.

If you’ve held a security for at least a year and sell it for more then you paid, you’ll owe long-term capital gains tax on the profit. If you held the investment for less than a year, you’ll have short-term capital gains, which are taxed as regular income. You can use losses to offset either type of gain, but if you have both, consider offsetting short-term gains first because they are usually taxed at a higher rate.

Harvesting losses regularly and proactively can save you money over the long run, effectively boosting your returns.

Additional fees, commissions, or trading charges will apply to tax-loss harvesting. There is no assurance that the benefits of tax-loss harvesting will exceed applicable fees, commissions, or trading charges in any given year.

  • Can only be performed in non-qualified (taxable) accounts.
  • While only harvesting losses was discussed, gains can also be harvested.
  • When conducting these types of transactions, you should be aware of wash sale rules, which states that if you sell a security at a loss and buy the same or a ‘substantially identical’ security within 30 days before or after the sale, the loss is typically disallowed for current income tax purposes (PNCI has the ability to monitor for this within our managed account program).
  • There are rules about carrying a tax-loss to future tax years, make sure you understand these rules before you harvest any losses.

Working with PNC Investments

Neither PNC Investments nor your Financial Advisor provide tax advice. You should review your tax situation with your own independent tax professional to fully evaluate how you may benefit.

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