Tax loss harvesting for enhanced portfolio efficiency

Tax loss harvesting is a key strategy that empowers advisors to manage client portfolios with greater tax sensitivity. Envestnet’s always-on tax overlay solutions help streamline this approach—letting you deliver more value while scaling your business.

What is tax loss harvesting?

Tax loss harvesting involves selling securities at a loss to offset gains realized elsewhere in a client’s portfolio. This strategy helps reduce taxable income, which can ultimately lower a client’s overall tax bill. For advisors, it’s a powerful tool to maximize tax efficiency and enhance after-tax returns for clients. By harvesting losses, you can manage capital gains taxes more effectively, creating opportunities to reinvest in a tax-efficient manner.

How it works

Deploying effective tax loss harvesting strategies for clients

Tax loss harvesting isn’t just about selling off assets at the end of the year—it’s about strategically managing portfolios year-round to help clients save on taxes. With direct indexing, you can build tax efficiency directly into your portfolios. This ensures you’re continuously optimizing for tax savings without leaving anything to chance. For high-net-worth clients who are particularly sensitive to tax implications, this strategy is a key way to reduce their tax liabilities and grow their portfolios in a tax-efficient manner. 

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Tax loss harvesting strategies

Identify losses

Evaluate portfolios for investment losses that can be harvested without disrupting the client’s broader allocation.

Realize losses

Execute trades by selling investments that no longer serve the portfolio—and realize those losses for tax planning purposes.

Offset gains

Apply realized losses to reduce exposure to capital gains taxes and potentially improve after-tax returns.

Decrease tax liability

Use Envestnet’s tax overlay to deliver automated, risk-based strategies that support efficient tax outcomes.

Reinvest

Maintain exposure by reallocating proceeds into similar assets—without triggering the wash sale rule.

Monitor and adjust

Track performance and rebalancing opportunities through a tax-aware lens using Envestnet’s integrated platform.

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Unlock tax savings with tax overlay

Tax loss harvesting is just one of the ways to lower clients’ tax bills in an effort to boost their portfolio growth.  Envestnet’s tax overlay solutions let you seamlessly apply tax-efficient strategies across your entire book of business. With our tax management capabilities (including direct indexing and dynamic overlays), you’ll be able to address clients’ evolving needs—whether that’s optimizing for tax savings or aligning strategies with their long-term wealth goals.

Frequently asked questions about tax loss harvesting

What qualifies for tax loss harvesting?

Losses realized in taxable accounts may be harvested if the security isn’t replaced by a substantially identical one within the same 30-day period. Losses must also be realized during the appropriate tax year for inclusion in tax returns.

What is the 30-day rule?

This rule refers to a 61-day window—30 days before and after a sale—during which purchasing a substantially identical security may disqualify the loss for tax purposes.

What is the wash sale rule?

The wash sale rule prevents investors from deducting a loss if they buy the same or substantially identical securities within 30 days of the sale.

How can I implement tax loss harvesting strategies for my clients?

Use tools that support tax-intelligent trading and align with each client’s cost basis and long-term plan. Envestnet’s platform makes this process seamless—supporting scale and deepening client trust through better tax saving outcomes.

Learn more about tax-efficient strategies with Envestnet

Explore how tax management plays a critical role in optimizing outcomes for clients and driving long-term growth. 

Schedule a 15-minute discovery call with us to discuss tax management strategies for your practice.

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Disclosures
The information, analysis, and opinions expressed herein are for general information only. Nothing contained in this website is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. Investing carries certain risks and there is no assurance that investing in accordance with the portfolios or strategies mentioned will provide positive performance over any period of time. Investors could lose money if they invest in accordance with the portfolios or strategies discussed herein. Past performance is not indicative of future results.

Neither Envestnet, Envestnet | PMC™️ nor its representatives render tax, accounting or legal advice. Any tax statements contained herein are not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax penalties. Taxpayers should always seek advice based on their own particular circumstances from an independent tax advisor. Client must carefully determine if the use of tax overlay services is appropriate for their circumstances, risk tolerance, and investment objectives. Tax management services are limited in scope and are not designed to permanently eliminate taxes in the account. In providing tax overlay services, Envestnet will allow Client's account to deviate from Client's selected investment strategy. Client's account may experience significant performance differences from the selected investment strategy due to Client's selection of tax overlay services. Envestnet makes no guarantee that the account's performance will be within any range of the selected investment strategy or the strategy´s benchmark. If Client subsequently disables tax overlay services this may result in the recognition of significant capital gains.