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Introduction to Tax Loss Harvesting on the Zoe Wealth Platform

  • Updated

We are thrilled to introduce: Tax Loss Harvesting (TLH) with Security Equivalents!

 

This powerful new feature is designed to help you personalize and optimize your clients' portfolios for tax efficiency with ease.
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What is Tax Loss Harvesting?

Tax Loss Harvesting (TLH) is an investment strategy for Taxable accounts that allows investors to sell securities at a loss to offset a capital gains tax liability, while maintaining the asset allocation exposure. This approach can reduce the amount of taxes your clients owe, potentially improving their overall investment returns.

 

Leveraging Security Equivalents

Our new Security Equivalents feature allows you to designate up to 10 substitutes for each ETF or mutual fund in a model. Equivalents are particularly beneficial for taxable accounts, where designated substitutes facilitate loss harvesting and can even automate legacy fund handling/transition to the new model.

 
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Benefits of Using Security Equivalents
  • Enhanced Loss Harvesting Opportunities: Increases the potential for loss harvesting, optimizing tax outcomes, and preventing potential wash sales violations.
  • Reduced Asset-Class Drift: Maintains portfolio balance and alignment with investment strategies.
  • Automated Legacy Fund Handling: Efficiently manages legacy positions without manual intervention.

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How to Implement TLH with Security Equivalents

Step 1: Create Security Equivalents

This can be done at the firm level from the portfolios section of the Dashboard. A security equivalent is an ETF or Mutual Fund that can replace a primary security to enhance loss harvesting opportunities.

 
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Step 2: Add Security Equivalents to a Sleeve or Model

When creating a new model or sleeve, you can choose a security with equivalents to build it, similar to any other regular security. An indicator will show that the security or sleeve contains equivalents.

 
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Step 3: Set Up TLH and Tax Budgeting Settings

Admins can set firm default values for tax budgeting and TLH. From the account settings view for an individual account, you can turn TLH on and set the account’s tax budget for the period. The Rebalancer supports proration of the annual tax and gains budgets in four intervals: Annually, Semi-annually, Quarterly, and Monthly. 

 

Budgeting Options:
    • Net Gains Budget: Considers both short- & long-term gains together as a sum.
    • Short-Term Gains Budget: Considers only short-term gains.
    • Long-Term Gains Budget: Considers only long-term gains.


These budgets can be combined and offset by losses to reduce net gains, allowing more losses to be realized. Note that a budget of $0 restricts rebalancing opportunities unless there are losses to harvest, whereas a no value (or empty field) directs the system to continuously look for harvesting opportunities.

 
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Start Adding Security Equivalents

To get started, we highly recommend you schedule some time with Reece Benevides for a personalized training. If you have questions, please don’t hesitate to reach out!