To help investors determine if the benefits of tax loss harvesting outweigh its costs in their circumstances.

Stock index mutual funds and ETFs are simple, cheap, and relatively tax-efficient. By increasing the opportunity for tax loss harvesting, a large portfolio of stocks offers the potential for greater tax efficiency, but also additional costs and complexity.

Few investors have the ability or desire to manage and harvest losses from a large portfolio. There is no shortage of professionals eager to do it for them. Our Tax Alpha Simulator enables the investor to determine if the increase in after-tax performance is sufficient to offset the manager's fees.

Claims that tax loss harvesting can increase annual after-tax returns by 1% to 2% are pervasive, but only true under specific assumptions that do not apply to most ordinary investors.

Taxpayers are only allowed to deduct $3,000 in realized capital losses each year. Losses in excess of this must be carried forward to future tax years. As a result, harvested losses are most valuable when they can be used immediately to offset short-term realized gains from other sources.

When estimating tax alpha, many marketers of tax loss harvesting strategies assume maximum tax rates and unlimited short-term gains available for offset.

Use our Tax Alpha Simulator to estimate the benefits given your tax rates and external gains.

ShadowBenchmark.com is provided by AlphaWorks,LLC, specialists in long/short tax-aware portfolio management.

www.alphaworksinfo.com

Please send all questions and comments to luke.smith@alphaworksinfo.com

The information contained herein was obtained from publicly available sources, has not been independently verified by AlphaWorks, may not be current, and AlphaWorks has no obligation to provide any updates or changes. AlphaWorks is not providing any financial, economic, legal, accounting, or tax advice or recommendations. The information presented here does not constitute investment advice or an offer to buy or sell securities and should not be relied upon to evaluate any potential transaction. S&P & S&P500 are registered trademarks of S&P Global, Inc. It is not possible to invest directly in an index. Neither AlphaWorks nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the statements or any information presented herein and any liability therefore (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed.