- Tax-loss harvesting (TLH) strategies are effective in reducing immediate capital gains tax liability payments for individuals, dependent on different variables.
- Such strategies may defer tax liabilities indefinitely until the taxpayer chooses a means of liquidation or even eliminate the liabilities if the taxable assets are held until death.
- Most of the benefits apply to federal taxes since states have different tax laws, sometimes limiting the advantages available on a state tax reporting level.
- The degree of success depends on many factors including applicable tax rates, income levels, size of flows, market volatility, and investment granularity.
- There are seemingly endless ways to implement a TLH strategy depending on the taxpayer’s preferences – manually, automatically, algorithmically, given specific timeframes, based on tolerance bands, and more.
