Tax-Smart Strategies
With elevated volatility and more modest forward-looking return expectations, it’s increasingly important to get your money working harder and smarter to help meet your financial goals. Our tax-smart strategies can help you achieve potentially higher after-tax returns, while tailoring your portfolio to make it uniquely yours.
It’s not what you earn, but what you keep that matters.
Seeing stocks you own drop in value is never easy, but there is an upside to market downturns. It’s called “tax loss harvesting,” and it can put stock losses to work for you.
At its simplest, tax loss harvesting is a strategy designed to help reduce your overall tax liability, so you can keep more of what you earn. It works by extracting tax benefits from selling investments at a loss – which can be used to offset capital gains realized elsewhere in your portfolio. When applied effectively, tax loss harvesting may result in enhanced after-tax returns.
How can tax loss harvesting help generate after-tax returns?
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It's not what you earn, but what you keep after taxes that matters. Personalized tax management is more important than ever and can make a significant impact on how much of your returns you actually keep, helping you protect and grow your investments for the future. One way to keep more of what you earn is a strategy called tax loss harvesting. In a nutshell, this strategy consists of: 1: Selling you're losing stocks. 2: Using those losses to offset capital gains in other parts of your portfolio. While, 3: Simultaneously reinvesting the proceeds in a similar stock to keep your portfolio in line with your objectives. This strategy could ultimately reduce your overall tax liability while maintaining your desired exposure in your portfolio and the potential for upside.
Here's a hypothetical example of how tax loss harvesting works. Let's say in March of 2020, you had $100,000 invested in stock A. Over the course of the month, the price fell by 40%. The new value of your position in stock A in April 2020 is now $60,000. To realize this loss for tax purposes, you could sell the losing investment in stock A at $60,000 and recognize a short-term tax loss of $40,000 generating potential tax savings of up to $16,320. At the same time, you want to continue to keep your portfolio in line with your objectives. So you reinvest the proceeds from your sale into an investment with similar characteristics, i.e. stock B. To retain your original exposures, you can now hold $60,000 of stock B, have locked in $16,320 of potential tax savings on your tax bill for the year, and can still benefit from this market sector's potential recovery from its lows.
When used efficiently throughout the year and throughout market cycles, tax loss harvesting can potentially help you achieve greater after-tax returns so you can keep more of what you earn. To learn more about how tax loss harvesting and our new tax smart solutions can help brighten your after-tax outlook, connect with your J.P. Morgan team.
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Narrator:
It's not what you earn, but what you keep after taxes that matters. Personalized tax management is more important than ever and can make a significant impact on how much of your returns you actually keep, helping you protect and grow your investments for the future. One way to keep more of what you earn is a strategy called tax loss harvesting.
On screen:
Graphic images show marbles (representing tax losses) contained in circular shallow pits.
Narrator:
In a nutshell, this strategy consists of: 1: Selling you're losing stocks. 2: Using those losses to offset capital gains in other parts of your portfolio. While, 3: Simultaneously reinvesting the proceeds in a similar stock to keep your portfolio in line with your objectives. This strategy could ultimately reduce your overall tax liability while maintaining your desired exposure in your portfolio and the potential for upside.
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Graphic images show groups of marbles (representing tax losses) contained in different circular pits.
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How It Works…
Narrator:
Here's a hypothetical example of how tax loss harvesting works. Let's say in March of 2020, you had $100,000 invested in stock A. Over the course of the month, the price fell by 40%. The new value of your position in stock A in April 2020 is now $60,000. To realize this loss for tax purposes, you could sell the losing investment in stock A at $60,000 and recognize a short-term tax loss of $40,000 generating potential tax savings of up to $16,320. At the same time, you want to continue to keep your portfolio in line with your objectives. So you reinvest the proceeds from your sale into an investment with similar characteristics, i.e. stock B. To retain your original exposures, you can now hold $60,000 of stock B, have locked in $16,320 of potential tax savings on your tax bill for the year, and can still benefit from this market sector's potential recovery from its lows.
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Graphic images show circles containing rectangular bars (representing tax savings).
Narrator:
When used efficiently throughout the year and throughout market cycles, tax loss harvesting can potentially help you achieve greater after-tax returns so you can keep more of what you earn. To learn more about how tax loss harvesting and our new tax smart solutions can help brighten your after-tax outlook, connect with your J.P. Morgan team.
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Graphic images illustrate possible after-tax returns ranging between plus 10% to plus 17%.
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To learn more about Tax Loss Harvesting, connect with your J.P. Morgan Team.
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Why Tax-Smart Strategies with J.P. Morgan Private Bank?
Our tax-smart approach combines our experience with cutting edge technology, to deliver a cost-effective and personalized strategy that can optimize your after-tax returns.
ENHANCED AFTER-TAX RETURNS
Tax-smart transitions and ongoing, automated tax management to potentially increase your after-tax returns
PERSONALIZED INVESTING
Flexible approach to funding (cash, securities, or both) and tailored investing to incorporate your investment views, preferences, and tax sensitivity
COST EFFECTIVENESS
Cost-efficient, tax-managed access to broad market indices, e.g., the S&P 500
Our investment expertise
$700+
Billion
Discretionary Assets Under Management
400+
Strategies
Created for you (across mutual funds, separate accounts and single/multi-asset strategies)
#1 Private
Bank
Awarded “Best Private Bank in the World” in 2020, 2021 and 2022 by Global Finance magazine.
Related & Recommended
TAXES
How do tax-smart strategies actually work?
Using a tax-smart strategy can help investors keep more of what they earn. Now may be an opportune time to consider adding one to your portfolio.
September 25, 2022
PORTFOLIO MANAGEMENT
How can today's market volatility be turned into tax benefits?
Tax loss harvesting can help enhance investors' after-tax returnsJune 22, 2022
Frequently Asked Questions
What is tax-loss harvesting?
Simply put, tax loss harvesting is the timely selling of securities at a loss to offset realized investment gains elsewhere in your portfolio. This provides an opportunity to lower your tax bill, allowing you to keep more of your returns.
What personalization options are available for my portfolio?
We offer a variety of ways to customize your portfolio to your individual preferences. We have over 40 screens for concentrated stock / industry exposure or values.
What is the minimum investment?
The minimum investment will depend on the strategy that you choose. For example, we offer minimums as low $250,000 where you can personalize your S&P 500 exposure.
What if I have appreciated holdings?
For investors looking to fund their portfolio with securities, we offer flexible transition options that are customized to their individual tax budget preferences. We’ll partner closely with you to design a portfolio that aligns with your wealth goals and preferences, while enhancing your after-tax return potential. You can also transition your existing holdings into a tax-efficient manner that’s cognizant of your unique tax budget preferences.
How will I know how my portfolio is performing?
Our robust performance reporting quantifies your tax benefit relative to the benchmark, helping you to easily understand the value-add of our active tax management.
What are the potential risks of a tax loss harvesting strategy?
Tracking error is one potential risk of a tax loss harvesting strategy. Tracking error reflects how closely your account aligns to your target portfolio – and we have a robust risk framework in place to ensure tracking error is minimized while the strategy looks for loss harvesting opportunities.
Investors considering a tax loss harvesting strategy should look at their portfolio holistically, to ensure that they stay on track to their overall investment goals.
