Harvest Losses in Down Markets

Global stocks and bonds are both down on the year¹ and volatility is still elevated — but broad losses offer big opportunities for tax-loss harvesting. Learn more.

Know Tax-Loss Harvesting Rules

What is Tax-Loss Harvesting?

Harvesting losses means selling investments in taxable accounts that have lost value to offset capital gains elsewhere and help reduce taxes owed.

What Happens When You Sell a Position That Has Lost Value?

The loss offsets capital gains from selling securities at a profit during the year, as well as annual capital gain distributions of mutual funds.
If capital losses exceed gains at year-end (or if there are no gains), losses can offset up to $3,000 in non-investment income, even though it is often taxed at a higher rate than capital gains.
You can carry forward losses above $3,000 to offset capital gains and ordinary income over your lifetime.

What is the Wash-Sale rule?

The Internal Revenue Service’s Wash-Sale Rule prohibits claiming a loss on the sale of an investment if the same or “substantially identical” investment is purchased either 30 days before or after the sale date.
A “tax swap” can serve as a placeholder to maintain exposure to the asset class for 30 days. After 30 days, you can decide whether to switch back to the original holding.

How to Use Tax Swaps

Reposition Portfolios

Tax swaps enable you to invest proceeds from the sale of losing position in a more permanent way to lower costs or target new markets.

Lower Your Costs

Expense ratios for SPDR Portfolio ETFs are 93% lower than the median US-listed mutual fund.³ Replacing higher-fee mutual funds with low-cost core equity and bond ETFs may help you build more cost-efficient portfolios.

Learn More

Target New Markets

Is ESG a priority? There are more ESG ETFs than ever to support broad market exposures. You can build a more ESG-centric portfolio by harvesting losses in traditional core holdings and swapping them for ESG ETFs.

Looking for Yield?

Consider these active SPDR® ETFs as swaps to seek higher yields while navigating ongoing volatility.

Compare Swaps Using Morningstar Tool

When to Harvest Losses

Why Not Wait Until Year-end?

The time to harvest losses is when losses occur. Investments that are down early in the year could bounce back into positive territory — resulting in missed opportunities to sell losers and book losses to offset gains.

To get maximum value from harvesting losses, take a long-term view of the asset and your needs when making decisions and consider:

Loss Amount

If a loss is less than $2,000, transaction and tracking costs may erode tax savings.

Holding Period

The longer you plan to hold the asset, the greater the chance that the tax savings you’ve re-invested will grow.

Legacy Plans

If an asset will be left to heirs, there’s less need to measure the value of harvesting a current loss against future taxes due should the asset appreciate. Because heirs receive a step-up in basis, growth doesn’t turn into a future tax liability.

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Footnotes

Disclosures

Important Risk Discussion

Investing involves risk, including the risk of loss of principal.

Diversification does not ensure a profit or guarantee against loss.

The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.

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Investing in high yield fixed income securities, otherwise known as “junk bonds,” is considered speculative and involves greater risk of loss of principal and interest than investing in investment-grade fixed income securities. These lower-quality debt securities involve greater risk of default or price changes due to potential changes in the credit quality of the issuer.

The values of debt securities may increase or decrease as a result of the following: market fluctuations, changes in interest rates, actual or perceived inability or unwillingness of issuers, guarantors or liquidity providers to make scheduled principal or interest payments or illiquidity in debt securities markets; the risk of low rates of return due to reinvestment of securities during periods of falling interest rates or repayment by issuers with higher coupon or interest rates; and/or the risk of low income due to falling interest rates.

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Because of their narrow focus, sector investing tends to be more volatile than investments that diversify across many sectors and companies.

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